One of the main differences between residential mortgage loans and permanent financing of commercial real estate lies in the allocation of liability in the case of default. In commercial real estate, a "bankruptcy remote" special-purpose entity is created that shields the actual borrower from personal liability. When a lender cannot lay claim to the personal assets of the defaulted borrower, this type of loan is commonly referred to as a:

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A nonrecourse loan is a type of commercial real estate loan where the borrower is not personally liable for repayment in the event of default. Instead, the lender can only seize the collateral pledged for the loan, such as the property itself. This is made possible by creating a "bankruptcy remote" special-purpose entity that shields the actual borrower from personal liability. This is a common feature of commercial real estate lending, but not typically seen in residential mortgage loans.

One of the Main Differences Between Residential Mortgage Loans and Permanent