In a nonjudicial foreclosure, borrowers sometimes 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.
When you take out a loan in a state that allows nonjudicial foreclosures, you will likely sign a deed of trust or a mortgage, which contains a power of sale clause. This clause gives the trustee—a third party that manages the nonjudicial foreclosure process in certain states—the right to sell the home though an out-of-court process if you stop making payments. (For more information about judicial and nonjudicial foreclosures, see Will Your Foreclosure Take Place In or Out of Court?)
Sometimes, depending on state law, a nonjudicial foreclosure process begins when the trustee records a Notice of Default (NOD) at the county recorder's office.
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 might (again, depending on state law) then prepare and file a Notice of Sale for the property.
The Notice of Sale (NOS) generally states:
The NOS might 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 might get:
For an overview of the foreclosure laws in your state, see our Key Aspects of State Foreclosure Law: 50-State Chart.
If you're facing a foreclosure and want to learn the specific procedures in your state, as well as about your rights during the process and whether you have any potential defenses to the foreclosure, consider talking to an attorney.