Three Things To Do if You Get a Foreclosure Notice of Default

The economy is on shaky legs and many people fear losing their job or their primary source of income. When you take out a mortgage on your house, your biggest fear might be to get notified that you might lose your home. It’s not uncommon for people to get greatly discouraged when they get a notice of default letter from their lender. 

However, receiving a notice of default doesn’t necessarily mean that you will lose your home. There are still things that you can do to stop foreclosure, or at least delay it. Often, a notice of default is just the first step of the foreclosure process. This means that it’s time to figure out a new action plan, rather than giving up and foreclosing your property.

Here, we are going to go over the foreclosure process, as well as an action plan that you can implement if you have received a notice of default. 

Defining a Foreclosure Notice of Default

If financial terms make your skin crawl and cause confusion, fret not. We are going to go over some of the most important terms in order for you to have a comprehensible understanding of what it means to receive a notice of default. Firstly, a notice of default is a public notice filed with a court that states that you are in default on a loan.

You might already be scratching your head, so let’s go further into explaining. What does “defaulting on a loan” mean? It means that you have stopped making payments on a loan for whatever reason. Defaulting on a loan can cause damage to your credit score and to your general financial health. 

If you fall behind on your mortgage, the lender will most likely file a notice of default since it’s the first step leading towards foreclosure. A notice of default will most likely contain the names and addresses of the lender and the borrower, as well as the address of the mortgaged property and the nature of the default.

Most of the time, the borrower will allow from 120 to 180 days of missed payments before a notice of default is sent out. 

You might have heard of the term “delinquency” in relation to mortgages or loans. Both defaulting and delinquency refer to missing payments. However, delinquency refers to missing a single payment, while a notice in default means you’ve missed several. Both affect your credit score negatively.

Notice of Default Received, What Now?

Receiving that foreclosure notice of default can be extremely unnerving and anxiety-inducing. However, once you receive the notice of default letter, you mustn’t give in to anxiety. Do not hide the letter somewhere, pretending that it doesn’t exist and that a huge sum of money is going to fall right into your lap.

1. Examine the Notice Carefully

The first step is not to panic, and the second step is to go through the notice of default fully and completely. Like previously mentioned, the notice of default letter will most often contain information about you and the lender, as well as the address of the property. Usually, the notice will also disclose what amount you owe and what the lender will do if the default isn’t cured.

2. Don’t Try To Avoid Your Lender

The most important thing you can do is contact your lender. Often, they will be willing to arrange a payment plan. Foreclosure is a costly business for the banks and they would rather avoid it, if possible. Most commonly, you will get 90 days to pay what you owe to your lender or arrange a different payment plan. 

If you don’t, your lender does have the right to record a notice of sale. A notice of sale essentially means that the lender is informing you and everybody else that your property will be sold. It’s important to know that the sale of your property cannot happen for 21 days after the notice of sale is on record.

If you were wondering if you could get out of a notice of default without your credit score taking a hit - the answer is, sadly, no. A notice of default or sale is a public document and is reported at the credit bureau. However, you can fix your credit score by working on it. Right now, one of the most important things is for you not to enter foreclosure or, at least, to delay it. 

3. The Worst-Case Scenario

If you simply don’t have the means to pay off your debt, you should consider selling your property. Yes, you can sell a house that is in the process of foreclosure. This is not optimal as you don’t want to lose your house, but you can likely get a better deal than if the banks put it up for auction. Still, this should be your last option.

Be Careful of Scammers

You also need to be aware of the fact that you might start getting a lot of calls when you receive a notice of default. The reason for this is the fact that these documents are public, meaning that any scammy company or agency that claims to help borrowers can get their hands on it. These people prey on people in vulnerable positions. Be careful.

Final words of advice

In today’s economy, it can often feel like we can’t take anything for granted. Companies go bankrupt, people are losing jobs or quitting due to immense workloads, and the prices of common goods are slowly but surely going up. Saving money and investing money is a lot harder when you have no steady cash flow going in.

A word of advice would be to try to set money aside every moment that you can, and it’s a part of your income or of your finances that you simply do not touch. Call it the “no foreclosure jar” or whatever you want, but let it remind you that that money is for the dark days; to keep you, your family, and your home afloat. 

Risking foreclosure or getting a notice of default is a nightmare scenario for most people, but there are things that you can do. One of the most important things is not to panic and not to get overwhelmed. The worst thing that you can do is pretend like the notice of default never arrived, in the conviction that everything will somehow resolve itself. (Spoiler alert: it won’t.)