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Fixed Income Q65

0. Sean obtains a 10 million GBP mortgage loan from Barclays Bank. Two years later, the principal on the loan is 8 million GBP and Sean defaults on the loan. Barclays Bank forecloses the loan, sells the property for 6 million GBP, and is entitled to collect the shortfall, 2 million GBP, from Sean. Sean most likely had a:

  • Option : A
  • Explanation : Barclays Bank has a claim against Sean for the shortfall between the amount of the mortgage balance outstanding and the proceeds received from the sale of the property. This indicates that the mortgage loan is a recourse loan. If Sean had a non- recourse loan, the bank would have only been entitled to the proceeds from the sale of the underlying property.
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