Non-Recourse Loans in Relation to Freddie Mac’s Optigo Small Balance Program
If a loan is non-recourse and a borrower defaults, a lender cannot pursue a borrower’s personal assets in order to repay the outstanding balance of the loan. However, most non-recourse loans come with “bad-boy” carve-out provisions, which make the loan recourse if the borrower commits certain “bad acts,” such as embezzlement, fraud, or the intentional declaration of bankruptcy. Most, but not all Freddie Mac Multifamily loans are non-recourse. In regards to the Freddie Mac SBL program, the vast majority of loans are non-recourse with bad-boy carve-outs, though certain loans, especially interest-only loans in smaller markets, may carry some recourse.