Buying a note with or without recourse?
If the agreement of assignment of the note and the endorsement of the note is silent, the note is assumed to be sold with recourse. This means if the borrower doesn’t pay you can recover your money from the note seller. Most people do not realize this. If you are happy to buy the note without recourse, then it should say on the endorsement. PAY TO THE ORDER OF: (your name) without recourse then signed and dated by the seller. But be careful of Usury laws. It has been held in some courts that if the new rate of interest that you will be receiving as a result of the discount is usurious then you could be in trouble. Example: Usury rate =18%, Face note rate = 16%, you buy note with 20% discount. New interest rate = 20.51%. This is OVER the Usury rate. Speak to your attorney first if this is a possibility.
