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.)
Initiation of a Nonjudicial Foreclosure
When you take out a loan in a nonjudicial foreclosure state, you sign a deed of trust (the 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?)
If you default on your payments, a third-party, known as the trustee, will often begin foreclosure proceedings after 90 days (three missed installment payments). The deed of trust that you signed when taking out the loan gives this third-party trustee the right to sell the home if you stop making payments.
Notice of Default
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:
- the name and address of the borrowers
- the name and address of the lender
- the name and address of the trustee
- the address and/or legal description of the mortgaged property
- a description of the default
- the action required to cure the default
- the date by which the default must be cured, and
- a statement that if the default is not cured by the deadline, the lender intends to sell the mortgaged property at a public sale.
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 file a Notice of Sale for the property.
Notice of Sale
The Notice of Sale (NOS) generally states:
- the property address and/or legal description
- a statement that the property will be sold at a public auction, and
- the date, time, and location of the foreclosure sale.
The NOS will usually be recorded in the county land records and published in a newspaper of general circulation in the county where the home is located, as well as posted on the property.
Differences from State to State
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:
- a Notice of Default followed by a Notice of Sale
- a combined Notice of Default and Sale
- a Notice of Sale stating that the property will be sold on a certain date, or
- notice by publication in a newspaper and posting on the property.
For the specific foreclosure procedure in your state, check our Summary of State Foreclosure Laws.