What is the difference between recourse and non-recourse states?

A recourse state or deficiency state means that if the loan is settled for less than the full balance — either through a short sale, short payoff or foreclosure — and it is sold for less than the full balance, the borrower is still responsible for the difference.

A non-recourse state means that the borrower is not responsible for that difference, and the lender has no recourse beyond the collateral. They cannot pursue the borrower for the deficiency.