Question about nonrecourse states & DSCR loans

[Sean Bramble]

I'm new to RE and just learned about the 12 nonrecourse states. Couple of questions:

- if a borrower defaults in a nonrecourse state, will an LLC protect them from a big hit to their personal credit?

- are DSCR loans in these states also by definition "nonrecourse"?

- can loans in these states "become" recourse loans if the lender simply asks the borrower to also sign a personal guarantee?

Thanks everyone!

[Matthew Crivelli]

@Sean Bramble

Very few DSCR loans are non recourse. The only non recourse DSCR loans I've ever been able to close is when the borrower is using a self directed IRA to complete the purchase / refi. Typically the borrower is taking a major LTV hit when using a SDIRA. (I closed a SDIRA refi in TX recently at 60% LTV, that was max leverage) If you give a personal guarantee on a loan and you fold, your credit will be cooked and the home will be foreclosed on no matter the state. The LLC will not offer protection in this case.