Question

One of the main differences between residential mortgage loans and permanent financing of commercial real estate lies in the allocation of liability in the case of default. in commercial real estate, a "bankruptcy remote" special-purpose entity is created that shields the actual borrower from personal liability. when a lender cannot lay claim to the personal assets of the defaulted borrower, this type of loan is commonly referred to as a:

Answer 1

Answer – Nonrecourse loan

 

In commercial real estate, the actual borrower is shielded from personal liability. In this case, the lender cannot lay claim to the personal properties of the borrower if ever he defaults. This type of loan is commonly referred to as a nonrecourse loan.