A non-recourse loan does not allow the lender to pursue anything other than collateral. For example, if you default on your non-recourse home loan, the bank can only foreclose on the home. They generally cannot take further legal actions against you. The bank is out of luck even if the sale proceeds do not repay the loan.
Non-recourse loans create the most risk for lenders. Because they can only collect the collateral - and nothing else, they want to see lower loan to value ratios to reduce their risk. These loans may have higher interest rates than recourse loans.
State laws often dictate whether a loan is a recourse loan or not. California is best known as a non-recourse loan state that makes it hard for lenders to sue. Some states give lenders flexibility in how they pursue defaults, but many lenders choose not to sue because defaulting borrowers often don’t have much to sue for.
Refinances, second mortgages, and "cash out" transactions tend to create recourse loans.
Purchase loans for your primary residence are most likely non-recourse loans in non-recourse states.
Home Warranty Providers:
HISCO Home Warranty
Fidelity National Home Warranty
1-800-308-1424 x 3404
First American Home Buyers Protection Corporation
For a Remodeling Contractor:
National Association of Remodeling Industry (NARI)
Silicon Valley Chapter: 408-559-4996