FinanceIntermediateAlaska Exam

A 'non-recourse' loan in Alaska real estate means:

AThe lender may pursue the borrower's personal assets if the collateral is insufficient to repay the loan, as a general rule
BThe lender's remedy upon default is limited to the collateral property and the lender cannot seek a deficiency judgmentCorrect
CNo prepayment penalty applies to the loan
DThe lender cannot charge more than a stated maximum interest rate

Why The lender's remedy upon default is limited to the collateral property and the lender cannot seek a deficiency judgment Is Correct

Answer B: The lender's remedy upon default is limited to the collateral property and the lender cannot seek a deficiency judgment

In a non-recourse loan, the lender's only remedy upon default is foreclosure on the collateral property. The lender cannot sue the borrower personally for any deficiency (the difference between what the property sells for at foreclosure and the outstanding loan balance).

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

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