Question

In recent years, lenders have been unwilling to relieve borrowers from personal liability in the event of fraud, environmental problems, or unpaid property tax obligations. Therefore, some lenders include a clause that pierces the single-purpose borrowing entity to hold the actual borrower liable in such instances. This clause is commonly referred to as a:

A. habendum clauseB. lockout provisionC. defeasanceD. "bad boy carve-out" clause

Answer 1

bad boy carve-out" clause

Step-by-step explanation:

"Bad boy" carve-outs are utilized in anti-recourse commercial property mortgages. Basically, such carve-outs offer the debtor the right to not become directly "on the line" in the circumstance of an anti-recourse failure on the conditions of the bond, but leave creditors safe if the applicant is a "bad boy."

The fact of the matter is that historically, all non-recourse credits have some degree of redress in case if the debtor becomes a "bad boy," then they will be no longer covered by the value of the loan anti-recourse clauses and then become fully liable for the overall related point and its many aspects.