Non-Recourse Expense

A A A

DEFINITION

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.

INVESTOPEDIA EXPLAINS

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 the debt. Typically ...
  2. Default

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

    A loan where the lending bank is only entitled to repayment from the profits ...
  4. Non-Recourse Debt

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

    A debt in which the creditor has limited claims on the loan in the event of ...
  6. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding share of common ...
  7. Forbearance

    A temporary postponement of mortgage payments.
  8. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes the monthly loan ...
  9. Billing Cycle

    The interval of time during which bills are prepared for goods and services ...
  10. USDA Non-Streamlined Refinancing

    A mortgage-refinancing option offered by the United States Department of Agriculture ...
Related Articles
  1. Understanding FHA Home Loans
    Retirement

    Understanding FHA Home Loans

  2. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  3. Detecting Accounting Manipulation
    Fundamental Analysis

    Detecting Accounting Manipulation

  4. No Debt Forgiveness For The Tax Man
    Taxes

    No Debt Forgiveness For The Tax Man

  5. What is the difference between a non-recourse ...
    Investing

    What is the difference between a non-recourse ...

  6. Forecasting Mortgage Rates: Buy, Sell ...
    Investing Basics

    Forecasting Mortgage Rates: Buy, Sell ...

  7. What counts as
    Credit & Loans

    What counts as "debts" and "income" ...

  8. How does my debt-to-income (DTI) ratio ...
    Home & Auto

    How does my debt-to-income (DTI) ratio ...

  9. Financing Options For Buyers Of Foreclosed ...
    Credit & Loans

    Financing Options For Buyers Of Foreclosed ...

  10. What are the best ways to invest in ...
    Investing Basics

    What are the best ways to invest in ...

comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center