Notice of default: A past-due mortgage payment notification sent to a homeowner.
Notice of default: A notification delivered to a homeowner that states that they have not made their payments by the predetermined deadline. It may also indicate that if the outstanding payments are not paid within a specified period of time, the bank may initiate a foreclosure on the homeowner’s property.
Notice of Default: First Step in the Foreclosure Process
A notice of default, a notification sent to a homeowner with property as security under a mortgage, informs the borrower that they are delinquent in their payments. The notice of default allows a stipulated period of time to cure the default. If payment is not made, the lender or bank may initiate foreclosure proceedings.
A sample notice of default will state the following:
“The attached notice of default was sent to (homeowner), in relation to (property description). This property may be sold to satisfy your obligation and any other obligation secured by the deed of trust or mortgage that is in default. (Homeowner) has, as described in the notice of default, breached the mortgage or deed of trust on the property described above.
“Important Notice: if your property is in foreclosure because you are behind in your payments, it may be sold without any court action, and you may have the legal right to bring your account in good standing by paying all of your past due payments plus permitted costs and expenses within the time permitted by law for reinstatement of your account, which is normally five business days prior to the date set for the sale of your property. No sale date may be set until approximately 90 days from the date the attached notice of default may be recorded (which date of recordation appears on the notice).
“This amount is (total) as of (date) and will increase until your account becomes current.”
Homeowners sometimes default on their homes voluntarily. This is known as a strategic default. Often homeowners will fail to make payments because the outstanding debt is greater than the value of the property, therefore, even if they attempted to sell the house, they would still owe money to the bank. In the end, strategic defaults have the same adverse consequences as unintentional defaults.
According to Massachusetts foreclosure defense attorney Adam T. Sherwin, “The most important thing for a homeowner receiving a notice of default is to not ignore it. A foreclosure is coming, and a delay in addressing this problem can make a resolution harder to come by.
“A homeowner receiving a notice of default should also review these letters closely. Mistakes can (and do) happen and it is a good idea to make sure everything in one of these notices is correct. Failure to comply with the requirements for a notice of default can be grounds for challenging a foreclosure, both pre-foreclosure and post-foreclosure.”
A landmark 2015 Massachusetts case, Pinti v. Emigrant Mortgage Company, Inc., established that “in order to conduct a valid foreclosure, a mortgagee was required to comply strictly with the terms of a paragraph in the mortgage concerning the mortgagee’s provision of notice to the mortgagor of default and the right to cure, as well as the remedies available to the mortgagee upon the mortgagor’s failure to cure the default, including the power of sale.”
The judge in the Pinti cited a 1932 case, Sweeney v. Morey & Co., which determined that “There must be strict compliance with requirements that relate to matters where the essential facts to be embodied in the notice are known to the person required to give the notice, and the notice is designed to draw the attention of his adversary to those facts”