Non-Recourse Loans: Turning Into Recourse and Back Again

Bankruptcy-RealEstate-Insights

Mastan v. Salamon (In re Salamon), 528 B.R. 171 (9th Cir. BAP 2015) –

The bankruptcy court disallowed the claim of a deed of trust creditor on the grounds that it was barred by the applicable state anti‑deficiency statute.  The creditor contended that it was entitled to treat its non-recourse loans as recourse loans under the Bankruptcy Code, which trumped the anti‑deficiency statute.

The debtor acquired an apartment building subject to two pre-existing loans secured by the property.  The acquisition was financed by the seller through a “wraparound” note and mortgage, which covered the first two loans, and an additional new loan.

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