Notice of Default: What It Means and What to Do

Key takeaways
* A notice of default (NOD) is a public filing that notifies a borrower they have breached their mortgage contract by falling behind on payments.
* It is often the first formal step a lender takes toward foreclosure, though in some cases it precedes negotiation or loan reinstatement.
* The notice must state who the borrower and lender are, the property involved, the nature of the default, and what must be done to cure it and by when.
* Respond quickly: contact the lender, review cure options, and seek legal or housing counseling if needed.

What is a notice of default?

A notice of default is a formal, public document filed with the court or recorded in the county where the property is located that states a mortgagor (borrower) is in default on their loan. It typically marks the beginning of a lender’s foreclosure process, though it can also be part of a protocol that opens a period for negotiation.

Typical information included
* Borrower’s and lender’s names and addresses
* Legal address of the property (and often parcel or legal description)
* Description of the default (missed payments, amount past due)
* Actions required to cure the default and any deadlines
* Lender’s stated intentions if the default isn’t cured by the deadline

How the process works
* Mortgage contracts usually specify how many missed payments constitute default; many allow a short period (sometimes up to several months) before formal action.
* If the borrower exceeds that threshold, the lender may file an NOD with the court or recorder’s office.
* After filing, there may be a legally required waiting or cure period during which the borrower can pay the arrears, negotiate a modification, or pursue other options.
* If the default is not cured, the lender can move forward with foreclosure actions, which can include activating the lien and seeking a court order to seize and sell the property.

Consequences
* A notice of default and any subsequent foreclosure actions are reported to credit bureaus and can severely damage credit scores.
* Foreclosure records can make it difficult to obtain future credit or a mortgage.
* Legal consequences vary by state and by whether the jurisdiction uses judicial or nonjudicial foreclosure processes.

What to do if you receive a notice of default
1. Read the notice carefully to understand the amounts and deadlines.
2. Contact your lender immediately to discuss options. Lenders may offer:
* Reinstatement (pay past-due amount plus fees)
* Loan modification
* Forbearance or temporary payment plan
* Short sale or deed in lieu, in some cases
3. Ask for a written record of any agreement.
4. Seek free or low-cost help: housing counselors approved by HUD, legal aid, or a consumer attorney experienced in foreclosure.
5. Keep documentation of all payments and communications.

Special considerations
* Some lenders use a notice of default as a procedural step intended to prompt discussions rather than to foreclose immediately. Others treat it as the final step before foreclosure begins.
* State law affects timelines, required notices, and borrower rights (right of redemption, mediation programs, etc.). Check local rules promptly.
* If you disagree with the default (for example, you believe payments were made), gather bank records and correspond with the lender to correct errors.

How serious is a notice of default?
* Very serious — it signals the lender may pursue legal action and foreclosure. Acting quickly can expand options to halt the process or mitigate damage.

Conclusion
A notice of default is a critical signal that mortgage delinquency has reached a formal stage. Promptly reviewing the notice, contacting the lender, and seeking qualified advice can often preserve options to reinstate the loan or negotiate a solution and reduce long-term financial harm.