Recourse and Non Recourse - Posted by Lynn

Posted by David Butler on June 18, 2007 at 16:20:14:

Hello Lynn,

Yes it could be usury, which is why it is rarely done… note buyers normally want note and collateral property to stand on their own - and discount what they are willing to pay accordingly. I don’t have any court cases immediately at hand for any given state, but seems like I saw one mentioned in a long thread covering the very same question about a week ago at:

Re: Walking backwards notes and uneven cash flows

You should find that helpful. Good Hunting, and

Have Fun For A Living

David P. Butler

Recourse and Non Recourse - Posted by Lynn

Posted by Lynn on June 18, 2007 at 15:19:25:

I was told if I get a note assigned with recourse, it could be usury and the Sec could consider it a loan. Is this true, and are the any court cases to research.

State laws vary on recourse and usury - Posted by John Merchant

Posted by John Merchant on June 22, 2007 at 08:11:17:

WA State has a decision on its law books from a few years back where this exact situation arose and was adjudicated in court.

The note holder lost* as the loan/note WAS ruled to be usurious loan as to guy who “recoursed” the loan, and the court found that the interest rate to him was way more than legal and was therefore usurious under WA State law.

*and lost BIG, losing not only the money he’d paid for the note, but also his own and the other side’s attorney fees,court costs, interest, etc.

I’d guess that poor guy never bought another note from anybody for anything and I’m just glad it wasn’t me who sold him that note as a great investment!