Notice of Default

What is a Notice of Default?

A Notice of Default can be any statement (typically written), from one party to another, asserting the recipient did not follow through on the terms or conditions of an agreed upon contract. A default simply means a failure to satisfy a commitment. A Notice of Default is commonly used in real estate law during the foreclosure process, but it can also be used in lease situations, or any contractual obligation.

It is important for individuals to understand how a default notice works with respect to the foreclosure process so they can properly prepare and respond to the claim. Failing to respond to a default notice could accelerate the foreclosure of a home, and limit a homeowner’s chances of preventing foreclosure.

Notice of Default in the Foreclosure Process

A Notice of Default , in real estate, is typically the first formal document to inform homeowners of the initiation of the foreclosure process. These foreclosure notifications tell borrowers he/she failed to make their mortgage payments by the predetermined deadline, and have thus defaulted on their mortgage contract. Failure to have insurance cover for a property, or not paying property taxes can also result in a Notice of Default, and an initiation of the foreclosure process.

A Notice of Default is usually recorded in the county recorder’s office upon filing, and may potentially negatively affect a borrower’s credit rating. The way a default notice works in the foreclosure process varies slightly based upon whether the borrower lives in a judicial or nonjudicial state.

Notice of Default in Judicial States

A Notice of Default in judicial states works slightly differently than in nonjudicial states since foreclosures must be processed through the courts. Lenders must first file a complaint and record a NOD in the county records. Homeowners approaching foreclosure may get a pre-filing notice informing them of an imminent start to foreclosure proceedings. After this time, homeowners will likely get a summons and complaint informing them foreclosure proceedings will soon begin.

Notice of Default in Nonjudicial States

A Notice of Default in nonjudicial states occurs when mortgage lenders record a NOD in the county records, and typically mail homeowners a default letter. If the homeowner does not resolve the default within the prescribed period of time, a Notice of Sale can be mailed to the homeowner, posted in public, recorded at the county record office, and printed in local newspapers.