Non-recourse loans are collateralized by which asset?

• A. The property
• B. The borrower's personal assets
• C. The cash flows
• D. The lender's funds

Answer: (A)

Non-recourse loans limit the lender’s claim to the collateral itself; the borrower isn’t personally on the hook for the loan beyond that security. In real estate financing, the collateral is the property being financed. If the borrower defaults, the lender can foreclose on the property to recover the loan balance, but generally cannot go after the borrower's other assets. There can be carve-outs for things like fraud or certain guarantees, but the standard security is the property. The other options don’t fit because personal assets would make it recourse, and the collateral is not the cash flows or the lender’s own funds.