Question

Fran Martin obtains a non-recourse mortgage loan for $500,000. One year later, when the outstanding balance of the mortgage is $490,000, Martin cannot make his mortgage payments and defaults on the loan. The lender forecloses on the loan and sells the house for $315,000. What amount is the lender entitled to claim from Martin?

Answer 1

The lender is entitled to claim only the amount they received from the foreclosure sale ($315,000), not the outstanding balance of the loan because it was a non-recourse mortgage.

Step-by-step explanation:

Fran Martin obtained a non-recourse mortgage loan for $500,000. After a year, with an outstanding balance of $490,000, he defaulted. Since it was a non-recourse loan, and the lender sold the house for $315,000, the lender is entitled to claim only the proceeds from the sale of the house. Therefore, Martin is not personally liable for the deficit, and the lender cannot claim any amount beyond the sale price of the house from Martin.