In a nonjudicial foreclosure, borrowers often receive a Notice of Default and a Notice of Sale, depending on state law. Read on to learn the difference between these two documents and under what circumstances you might receive them.
(Learn about foreclosure, and what you can do to avoid it, in our foreclosure area.)
When you take out a loan in a nonjudicial foreclosure state, you sign a deed of trust or a mortgage, which will typically contain a power of sale clause. If you have a power of sale provision in your mortgage contract, the lender can foreclose without going to court. (For more information, see our article What is a Power of Sale Foreclosure?)
The deed of trust or mortgage that you signed when taking out the loan gives the trustee (a third party that manages the nonjudicial foreclosure process in certain states) the right to sell the home if you stop making payments.
Generally speaking, a nonjudicial foreclosure process formally begins when the trustee records a Notice of Default (NOD) at the county recorder's office. To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see our Judicial v. Nonjudicial Foreclosure topic area.
The NOD serves as public notice that the borrower is in default. The NOD often contains:
If the borrower does not “cure” the default by bringing the payments up to date (including late charges and foreclosure fees), the trustee will then prepare and file a Notice of Sale for the property.
The Notice of Sale (NOS) generally states:
The NOS may be recorded in the county land records, mailed to the borrower, published in a newspaper of general circulation in the county where the home is located, as well as posted on the property and/or in a public place.
While you might get both a Notice of Default and a Notice of Sale as part of the nonjudicial foreclosure process where you live, foreclosure procedures and the documents you will receive do vary widely from state to state. You may receive:
For the specific foreclosure procedure in your state, check our Summary of State Foreclosure Laws.