Business Glossary

Business Definition for: without recourse

Dictionary of Banking Terms

without recourse

In general: phrase meaning that credit risk, or risk of nonpayment, is assumed by the buyer, rather than the seller, of a promissory note or the holder of a negotiable instrument. In negotiable instruments law, the endorser of a check or draft cannot be held accountable for payment to subsequent holders in the event the maker or drawer fails to pay, if the endorsement contains the words "without recourse." Such an endorsement is a qualified endorsement under Article 3 of the Uniform Commercial Code.See also holder in due course
Banking:

financing arrangement or dealer floor planning in which the dealer's liability is limited to warranties about the quality of the installment contracts, which the lender purchases at a discount. Defective installment contracts are not charged back automatically to the dealer. A nonrecourse plan may, however, require the dealer to assist in repossessions and collections of delinquent accounts.See also nonrecourse loan
language in a secondary market sale of loans, certificates of deposit, and so on, in which the seller is under no obligation to reimburse the investor for any losses suffered. Transactions where the buyer can ask for compensation are regarded by bank regulators as financings and do not qualify as sales of assets; the loans or deposits involved must remain on the seller's balance sheet.

Dictionary of Real Estate Terms

without recourse

words used in endorsing a note or bill to denote that the holder is not to look to the debtor personally in the event of nonpayment: the creditor has recourse only to the property. A form of exculpation. Same as nonrecourse .

Example: Abel insisted that the mortgage to the seller be without recourse. In the event that the value of the property declines, Abel may lose the property but he loses nothing else.

See also endorsement , exculpatory clause

Dictionary of Business Terms

without recourse

words used in factoring receivables or endorsing a note or bill to denote that the holder is not to look to the debtor personally in the event of nonpayment. The creditor has recourse only to the property. This is a form of exculpation, synonymous with nonrecourse.

See also endorsement or indorsement , exculpatory

Related Terms:

endorsement

signature on a draft or check by a payee before transfer to a third party. A payee provides such an endorsement when transferring this draft to the payee's bank. Checks can be endorsed in three different ways. In a blank endorsement, once signed, it becomes a negotiable instrument and can be used as such by anyone. A restrictive endorsementlimits the use of the check to a single purpose. "For deposit only" is written on a check when it is deposited by mail. If the check is lost in the mail and subsequently found, it cannot be cashed. A special endorsementis used to pay someone else. All that is required is to indicate the payee and sign.

exculpatory clause

a provision in a mortgage allowing the borrower to surrender the property to the lender without personal liability for the loan.

Example: Abel buys land for $100,000, paying $40,000 cash and gives a $60,000 mortgage to the seller with an exculpatory clause. The market value of the land drops suddenly to $55,000. Abel abandons the mortgaged property, losing the $40,000 investment but keeping everything else he owns.

endorsement or indorsement

signature of a payee, drawee, or similar party on the back of a check or note to assign or transfer the paper to another; the act of so signing.
using celebrities to vouch for (endorse) a product in an advertisement, usually for a fee.
written agreement attached to an insurance policy to add or subtract insurance coverage. Once attached, the endorsement takes precedence over the original provisions of the policy. For example, under a homeowner's policy, an inflation guard may be used so that property damage limits are increased automatically to reflect an increase in the cost of construction in the community. Vandalism and malicious mischief can be added to the standard fire policy through an endorsement.

exculpatory

evidence or statements that tend to justify or excuse a defendant from alleged fault or guilt.
clause in amortgage that avoids personal liability. The property is the sole collateral for the debt.

Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

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Business Glossary

Business Definition for: without recourse

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