In general, an exculpatory clause is a clause that eliminates a partys liability for damages caused by a breach of contract. A common type of exculpatory clause involves limiting liability on a loan to the collateral. In other words, if there is a default, the contract says that the damages will be limited to execution on the collateral (i.e., foreclosure on the property covered by the mortgage or deed of trust).
South Dakota Exculpatory Clause or Nonrecourse Provision in Mortgage regarding Deficiency Judgment refers to a legal provision within a mortgage agreement that protects borrowers in the event of a foreclosure or default on their mortgage. This clause is specifically designed to limit the lender's ability to pursue a deficiency judgment, which is a legal action taken to recover the remaining balance on a mortgage that exceeds the foreclosure sale proceeds. In South Dakota, there are different types of Exculpatory Clause or Nonrecourse Provision in Mortgage regarding Deficiency Judgment: 1. Traditional Exculpatory Clause: This type of clause explicitly states that the borrower will not be held personally liable for any deficiency judgment after a foreclosure sale. It provides protection to the borrower to ensure that they will not be pursued for the remaining loan balance. 2. Limited or Partial Exculpatory Clause: This clause limits the lender's ability to seek a deficiency judgment up to the fair market value of the property at the time of foreclosure. If the foreclosure sale proceeds are equal to or higher than the fair market value, the lender is prohibited from pursuing the borrower for any deficiency. 3. Full Recourse Clause: In some cases, a mortgage agreement may not include any Exculpatory Clause or Nonrecourse Provision regarding deficiency judgments. This means that the borrower can be held fully liable for any remaining debt even after the foreclosure sale. It is important for borrowers to carefully review their mortgage agreements to understand the type of Exculpatory Clause or Nonrecourse Provision they have in place, as it directly affects their liability in the event of default or foreclosure. Proper comprehension of these clauses can help borrowers manage their financial obligations and potential risks associated with mortgage loans.
