What Is Notice of Default in Home Mortgages?

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ByNathan Paulus
Edited byVictoria Copans
ByNathan Paulus
Edited byVictoria Copans

Updated: August 24, 2023

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A notice of default (NOD) is a formal warning issued by lenders when borrowers fail to meet their payment obligations. It's typically filed after a series of missed payments, signaling the initial step in the foreclosure process. Receiving this notice can have severe implications, including potential property loss and lasting credit damage.

By understanding the notice of default issuance process and its implications for homeowners, you can be better prepared for how manage it if you receive one.

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  • A Notice of Default (NOD) is a formal warning issued by lenders when there's a breach in mortgage terms, primarily due to missed payments.
  • Triggers for an NOD can extend beyond missed payments to include lapses in required insurance, neglect of property taxes or other mortgage term violations.
  • Financial implications of an NOD can include a damaged credit score, added potential fees and difficulties in future borrowing prospects.
  • After receiving an NOD, it's crucial to review the notice, communicate with the lender, seek legal counsel and consider refinancing options.

How and When Is a Notice of Default Issued?

Lenders and mortgage servicers actively track payment schedules and communicate with borrowers. When homeowners default on their obligations, these entities assess late fees, send reminders and, if necessary, issue a notice of default. The following is an overview of the typical timeline leading to an NOD and as well as other potential reasons why a notice of default may be issued aside from missed payments.

Notice of Default Issuance Process


Step 1: Missed Payments

The monthly mortgage payment is expected by the lender but is missed by the borrower.


Step 2: Grace Period

Most lenders offer a 15-day grace period. During this time, payments can be made without incurring late fees.


Step 3: Late Fee Assessment

If the payment isn't received by the end of the grace period, lenders typically impose a late fee.


Step 4: Communication From Lender

After 30 days of non-payment, lenders must send notice about the missed payment before they can issue a notice of default. The Consumer Financial Protection Bureau (CFPB) mandates that mortgage servicers reach out to borrowers in good faith to remind them of their obligations.


Step 5: Notice of Default Issuance

If the borrower doesn't make a payment for 120 days, lenders often issue a notice of default, indicating the start of the foreclosure process.

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The CFPB prohibits mortgage servicers from making a first notice or filing for foreclosure until the borrower is more than 120 days delinquent. This rule allows borrowers time to explore mortgage assistance options and submit an application. Lenders can't start the foreclosure process during assistance evaluation.

Sample Notice of Default

Below is a sample NOD from the state of California, providing a visual representation of the document's typical structure and content homeowners might encounter.


Factors Leading to a Notice of Default Besides Non-Payment

While missed payments are the most common trigger for a notice of default, various other factors stemming from violations of the mortgage agreement can lead to one as well.


Financial Impact of a Notice of Default

Receiving a notice of default means that lenders have initiated legal steps to reclaim the property and that homeowners are immediately confronting the risk of foreclosure. Aside from the threat of losing one's home, there are several other ramifications of an NOD for borrowers.

Credit Score and Future Borrowing Potential


Potential Additional Fees or Penalties


What to Do After Receiving an NOD

Swift and informed action is key upon receiving a notice of default. The following steps can guide homeowners in navigating this challenging situation to make the best decisions for your circumstances.


Read the NOD

Examine the document for accuracy, noting missed payment amounts and the specified remedy period.


Contact Your Lender

Initiate a conversation immediately and express your intent to resolve the issue.


Organize Financial Records

Prepare recent pay stubs, bank statements and monthly expenses to discuss potential solutions.


Explore Loan Workout Options

Ask your lender about loan modifications, repayment plans or forbearance agreements.


Communicate Regularly

Maintain an open dialogue with your lender, updating them on your situation.


Seek Professional Advice

Consult a financial advisor or legal counsel for guidance tailored to your circumstances.

Frequently Asked Questions

MoneyGeek addressed some of the most common questions from homeowners when learning about or faced with a notice of default.

What is the primary purpose of a notice of default?
How long after missing payments can a lender issue a notice of default?
Can I still keep my home after receiving a notice of default?
How does a notice of default impact my credit score?
Is it possible to reverse a notice of default?

Related Content

For further insights and information related to mortgages and financial planning, MoneyGeek offers an array of resources. Dive deeper into topics that complement your understanding of notices of default.

  • Foreclosure Assistance: Learn about the various ways to prevent foreclosure and the assistance available to homeowners. This guide can help you navigate challenging financial times related to your home.

  • Glossary of Mortgage Terms: Enhance your mortgage vocabulary with this comprehensive glossary. It provides definitions and explanations for numerous terms, aiding in a clearer understanding of home loans and related topics.

  • Mortgage Refinance Guide: Contemplating refinancing your mortgage? This guide walks you through the process, benefits and considerations, offering a broader perspective especially if you're trying to avoid potential default situations.

  • How to Get Prequalified for a Mortgage: Start your homeownership journey on the right foot. This resource demystifies the prequalification process, ensuring you're well-prepared when you decide to purchase a home.

About Nathan Paulus

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Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.