Non-Recourse Expense

AAA

DEFINITION of 'Non-Recourse Expense'

An accounting term that sometimes refers to the cost of absorbing losses on defaulted non-recourse debt. In other words, when a borrower fails to repay a non-recourse loan, the lender's only possible recourse is to seize any pledged collateral and sell it. The loss that results between what the asset is sold for and what is actually owed is written off as a non-recourse expense, but there can be variations in the name of this line item.

BREAKING DOWN 'Non-Recourse Expense'

While non-recourse expenses are most often associated with certain types of home mortgages, they are also found on the books of small businesses. Also, sometimes investors will take out non-recourse loans to fund IRA investments, which are secured by their property. Should the borrower default, the lender will seize the property and try to recover the loan amount, and any losses will be non-recourse expenses.

RELATED TERMS
  1. Full Recourse Debt

    A guarantee that no matter what happens, the borrower will repay ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Non-Recourse Debt

    A type of loan that is secured by collateral, which is usually ...
  4. Limited Recourse Debt

    A debt in which the creditor has limited claims on the loan in ...
  5. Non-Recourse Finance

    A loan where the lending bank is only entitled to repayment from ...
  6. Operating Cost

    Expenses associated with the maintenance and administration of ...
Related Articles
  1. Retirement

    Understanding FHA Home Loans

    Don't be overwhelmed when filling out these forms. Find out what you need to do here.
  2. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  3. Fundamental Analysis

    Detecting Accounting Manipulation

    "One-time charges" and "investment gains" are two strategies companies can use to distort their numbers.
  4. Taxes

    No Debt Forgiveness For The Tax Man

    Debt settlement sounds like a free lunch, but it has tax consequences.
  5. Investing Basics

    What's Current Portion of Long-Term Debt?

    The current portion of long-term debt is the part of a company’s long-term debt that must be repaid within the next year.
  6. Economics

    Explaining Cost Control

    For a business, cost control entails managing and reducing expenses.
  7. Economics

    Explaining Accounting Conservatism

    Accounting conservatism is a principal that requires accounting rules be applied with high degrees of verification.
  8. Term

    What are Non-GAAP Earnings?

    Non-GAAP earnings are a company’s earnings that are not reported according to Generally Accepted Accounting Principles.
  9. Credit & Loans

    5 Signs a Reverse Mortgage Is a Bad Idea

    Here are the key situations when you should probably pass on this type of home loan.
  10. Credit & Loans

    5 Signs a Reverse Mortgage Is a Good Idea

    If these five criteria describe your situation, a reverse mortgage might be a good idea for you.
RELATED FAQS
  1. What is the difference between a non-recourse loan and a recourse loan?

    The essential difference between a recourse and non-recourse loan has to do with which assets a lender can go after if a ... Read Full Answer >>
  2. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  3. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>
  4. Do dividends go on the balance sheet?

    The only account recorded on the balance sheet, when dividends are declared and before they are paid out to a company's shareholders, ... Read Full Answer >>
  5. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  6. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Depreciation

    1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both ...
  2. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  3. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  4. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  5. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  6. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!