What is a Notice of Default?
A Notice of Default (NOD) is the official notice that you are behind on your mortgage and the lender has started foreclosure. It is recorded at the county recorder's office, so it is public information. That is why many owners start getting a lot of mail and calls from strangers after an NOD.
The NOD shows the amount needed to cure the default as of the recording date and the trustee's contact information. That amount grows over time with additional monthly payments and fees.
Timeline
- Before the NOD: the lender must contact you to discuss options. Federal rules generally do not allow foreclosure to start until you are more than 120 days late.
- The NOD is recorded.
- At least 3 months later: the lender may record a Notice of Trustee Sale (NTS), which sets the auction date.
- The NTS is posted on the house and published, at least about 3 weeks before the sale.
- Until 5 business days before the auction: you may still pay the overdue amount plus fees and keep the house.
- Auction day. The date can be postponed several times.
In practice, from NOD to auction is usually at least about 4 months. But do not wait: the closer to the auction, the fewer options you have.
5 options
1. Pay the overdue amount
Call the trustee or lender for the exact figure. You might use family help, retirement funds (careful with taxes and penalties), or other assets.
2. Ask for a loan modification or forbearance
A loan modification lowers your monthly payment. Forbearance pauses or reduces payments for a time. Submit a complete application as early as possible. HUD-approved housing counselors help for free.
3. Sell before the auction
Sell with an agent if there is enough time, or for cash if you need speed. The sale pays off the loan and the remaining equity is yours.
4. Short sale
If the house is worth less than you owe, the lender may agree to accept less. Needs time and a hardship file.
5. Deed in lieu
The lender takes the house back instead of foreclosing. Requires the lender's agreement.
Beware of "save your home" offers
- Anyone asking for an upfront fee to negotiate with the bank: California law prohibits upfront fees for loan modification services
- Anyone telling you to stop paying your lender and pay them instead
- Anyone asking you to sign over your deed (grant deed, quitclaim) so they can "hold it" and rent it back to you
- Anyone who guarantees they can stop the foreclosure
When you sell your home to an investor after an NOD, California law (Civil Code §1695) gives you 5 business days to cancel and requires the contract to be in the language used to negotiate. Read more about selling after an NOD →
What to do this week
- Open every letter from the lender; do not leave them
- Call the lender for the reinstatement amount and expected sale date, if any
- Call a HUD-approved housing counselor (free)
- Find out what the house is worth to calculate equity
- Decide: keep the house, or sell to keep the money
This article is general information only, not legal or tax advice. Laws change; ask an attorney or CPA about your specific situation.