Under a nonrecourse mortgage, can the lender obtain a deficiency judgment from the borrower after foreclosure?

• A. Yes
• B. Only if personally guaranteed
• C. No
• D. Only if the loan is recourse

Answer: (C)

Nonrecourse means the borrower's liability is limited to the pledged property; the lender’s remedy after default is foreclosing on that property, not pursuing the borrower personally. After the foreclosure sale, if the proceeds don’t cover the loan, the lender cannot sue the borrower for the deficiency—the borrower isn’t personally liable in a true nonrecourse loan. The only way a deficiency judgment can be obtained is if there is personal liability created—either the loan is recourse or there is a personal guaranty—so in those cases the lender can pursue the borrower (or guarantor) for the shortfall. So, with a true nonrecourse mortgage, a deficiency judgment against the borrower is not available.