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If you fall behind on mortgage payments, your lender or servicer can initiate a foreclosure. The first legal step in this process is filing a notice of default. Here’s what that means and how to address it if you find yourself in this situation.
A notice of default is a public notice filed with a court or local recording office to begin the process of foreclosure. A mortgage lender or servicer can file this notice after four months (120 days) of missed mortgage payments.
If your servicer files a notice of default, you’ll need to act quickly to bring your mortgage back in good standing and avoid losing your home. Aside from designating your home is in foreclosure, the default appears in your credit history and impacts your score, and potentially your ability to obtain a mortgage or other loan in the future.
A notice of default typically includes:
The notice might also include mortgage relief resources if you need help getting your payments back on track.
A notice of default filing is the first step in the formal process of foreclosure. Here’s how it works:
If the borrower and the servicer agree on how to resolve the missed payments, the case is considered settled. If the borrower ignores the notice of default or fails to reach an agreement with the servicer, the servicer can proceed with the foreclosure process, ultimately selling the home.
If you’ve fallen behind on mortgage payments, haven’t contacted your servicer yet or have ignored your servicer’s attempts to reach out, a notice of default shouldn’t necessarily come as a surprise. You can still take action at this point, however, by contacting your servicer. Generally, servicers want to avoid foreclosure just as much as you do.
When you contact your servicer, you’ll be put in touch with the loss mitigation department, which might offer one or more of these mortgage relief options:
Along with contacting your servicer, you can contact a HUD-approved housing counselor to determine your best course of action.
Ignoring a notice of default gives your mortgage servicer no choice but to continue with the foreclosure process, ultimately resulting in the sale of your home and eviction. Aside from needing to find a new place to live, the default notice and foreclosure will stay on your credit report for up to seven years, making it more difficult to obtain a new loan in the future.
The state court is involved in the notice of default process by providing a legal framework for mortgage servicers to initiate what’s known as a judicial foreclosure. Not every state allows judicial foreclosures, however. Servicers in these states can pursue a nonjudicial foreclosure by filing a notice of default with the local recorder’s office.
If you receive a notice of default in error or weren’t notified of the missed payments and pending legal action, you can dispute the notice. The time frame for responding to the notice varies by state. For example, in New York, you have 30 days to respond to a notice by mail.
