# Notice of Default: Meaning, Overview, Special Considerations

> **Definition**
>
> A notice of default is a public notice filed with a court indicating that a borrower has failed to meet mortgage payment obligations.

## What Is a Notice of Default?

The term notice of default refers to a public notice filed with a court that states that the borrower of a [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) is in default on a loan. The [lender](https://www.investopedia.com/terms/l/lender.asp) may file a notice of default when a mortgagor falls behind on their mortgage payments. Information on notices of default normally includes the borrower and lender's name and address, the legal address of the property, the nature of the default, as well as other pertinent details. A notice of default is often considered the first step toward foreclosure.

### Key Takeaway

*   A notice of default is a public notice filed with a court that states that a mortgagor is in default.
*   It is typically the final action lenders take before activating the lien and seizing the collateral for foreclosure.
*   The notice must include details such as the borrower and lender's name and address, the property address, and the nature of the default.

## How Notices of Default Work

A notice of default is a serious action taken by a lender. It notifies a borrower that their delinquent [mortgage payments](https://www.investopedia.com/mortgage/mortgage-rates/payment-structure/) have breached the limit as outlined in their mortgage loan contract. Lenders outline the number of delinquent payments allowed in a mortgage contract before default action is taken. Most contracts generally allow up to 180 days of missed payments and [delinquencies](https://www.investopedia.com/ask/answers/062315/what-are-differences-between-delinquency-and-default.asp) before any action is taken to file a notice of default.

A notice of default is typically the final action lenders take before activating the [lien](https://www.investopedia.com/terms/l/lien.asp) and seizing the [collateral](https://www.investopedia.com/terms/c/collateral.asp) for foreclosure. A notice of default is usually filed with the state court in which the lien is recorded, followed by a hearing to activate the [perfected lien](https://www.investopedia.com/terms/p/perfected-lien.asp) recorded with the mortgage closing. Some cases may allow time for the borrower to negotiate by potentially paying delinquent debt or suggesting a settlement.

If the case proceeds to the approval of the perfected property lien, the lender notifies the borrower that the lien is activated. With an activated lien and a court order for property seizure, the lender can take legal action and ask the borrower to vacate the property.

All notices of default contain relevant information pertaining to the borrower, lender, and the property. These details include but aren't limited to:

*   The name and address of the borrower
*   The name and address of the lender
*   The legal address of the property
*   Full details on the nature of the [default](https://www.investopedia.com/terms/d/default2.asp)
*   What action is required to cure the default
*   The deadline and the intentions of the lender if the deadline is passed without a cure

## Special Considerations

If a borrower has several delinquent payments, they are at risk of default on a mortgage loan. This also poses the risk of lost collateral. When this happens, the lender may file a notice of default. While this notice may lead to [foreclosure](https://www.investopedia.com/terms/f/foreclosure.asp), that isn't always the case. The lender may simply be taking this step as protocol, and be willing to work with the borrower to bring the account up to date. Filing the notice may also include a negotiation [grace period](https://www.investopedia.com/terms/g/grace_period.asp) before further action is taken.

> **Important**
>
> While some lenders use notices of default as the final step before foreclosure, others use it as a way to work with borrowers to bring the mortgage up to date.

A notice of default and subsequent foreclosure actions are documented and reported to [credit bureaus](https://www.investopedia.com/terms/c/creditbureau.asp). Thus, all foreclosure proceedings and actions can have serious repercussions on a borrower’s [credit score](https://www.investopedia.com/terms/c/credit_score.asp). This will also reduce the borrower’s ability to obtain a mortgage or any type of debt in the future.

Some lenders may choose to serve the delinquent borrower with a notice of intention rather than a notice of default levy or they may provide warnings to the borrower, which gives them time to negotiate.

## What Happens When You Get a Notice of Default?

If you receive a default notice, it means you've already reached the number of delinquent payments allowed according to your contract. The notice informs you that the lender is beginning proceedings to foreclose or go after the debt.

## How Do You Respond to a Notice of Default?

Read through the default notice carefully and contact your lender to discuss steps you may be able to take to get caught up with your loan. In some cases, the lender may work with you to modify the loan terms.

## How Serious Is a Default Notice?

It's very serious if you receive a notice of default because it means your creditor may begin legal proceedings against you or pass your debt to a collection agency.

## The Bottom Line

Receiving a notice of default is typically the first step a lender takes when foreclosing on a house. If you've received notice, you could try contacting the lender to discuss catching up on your payments. Some lenders might prefer to work with borrowers who are behind on their payments than go through the legal process of foreclosure.

> **Article Sources**
>
> 1.  Cornell Law School Legal Information Institute. "[Notice of Default](https://www.law.cornell.edu/wex/notice_of_default)."
>     
> 2.  North Carolina Judicial Branch. "[Foreclosures](https://www.nccourts.gov/help-topics/housing/foreclosures)."
>     
> 3.  Cornell Law School Legal Information Institute. "[24 CFR § 266.626 - Notice of Default and Filing an Insurance Claim](https://www.law.cornell.edu/cfr/text/24/266.626)."
>     
> 4.  Equifax. "[What Is a Foreclosure?](https://www.equifax.com/personal/education/loans/foreclosure-effects-credit-scores/)"