A notice of default is a written letter telling the payer which term of the note they have broken, what it will take to fix it, the deadline for doing so, and what you may do if they do not. Your note, your security instrument and the law of the state where the property sits decide when you can send one and what it must say. A notice that gets those wrong can delay a later foreclosure or forfeiture, so have an attorney in that state review it before it goes out.
This page is general information for note holders, not legal advice, and it does not replace an attorney who has read your documents. If you are still working out whether the payer is in default at all, or only late, start with what counts as default on a note.
Late notice, notice of default and acceleration
Several different letters get called a notice of default, and they do different jobs.
| Letter | What it does | Usual timing |
|---|---|---|
| Late notice or reminder | Tells the payer a payment is overdue and a late charge applies, if the note allows one | Soon after the grace period ends |
| Notice of default and right to cure | Names the default, the amount or action that cures it and the deadline, and warns of acceleration | Once a default exists under your documents |
| Notice of acceleration | Declares the whole balance due because the default was not cured | After the cure deadline passes |
| Statutory foreclosure or forfeiture notices | The notices state law requires as part of the remedy, in some states recorded in the county records | Set by statute, usually prepared by an attorney or trustee |
This page deals with the second letter, the one a holder sends before any legal process begins. In some states that foreclose outside court, “notice of default” is also the name of a formal document recorded to start foreclosure. That one is prepared under statute and is not something to draft yourself.
Before you send it
- Read the documents. Find the default and notice sections in the note and in the security instrument, which is the mortgage, deed of trust or land contract. Write down the grace period, the late charge, the cure period, and how notices must be delivered and to what address. Many widely used standard forms call for a cure period of at least 30 days from the notice. Private documents vary, so go by yours.
- Check the payment record. List every payment due and every payment received, with dates. The amount in your notice has to be right to the dollar.
- Check for bankruptcy. If the payer has filed, the automatic stay generally stops collection letters. Speak to a bankruptcy attorney first, and see what a bankruptcy filing means for your note.
- Check military status. The Servicemembers Civil Relief Act gives servicemembers on active duty protections that can affect foreclosure and interest. An attorney can check status through the Defense Department’s records.
- Check the home-loan rules. If the property is the payer’s home, federal servicing rules may require early contact and limit when the first foreclosure step can be taken, and many states add their own pre-foreclosure notices, counseling information or mediation. The federal side is set out in the servicing rules note owners must follow.
What the notice should contain
- Your name and the payer’s name, the property address, and the date of the note and security instrument.
- The specific default: which payments were missed, by due date, or which other duty was broken, such as unpaid property taxes or lapsed insurance.
- The amount needed to cure, itemized: the missed payments, plus late charges only if the note allows them and only in the amount it allows.
- The cure deadline as a calendar date, no shorter than your documents and state law require.
- How and where to pay, and who to contact with questions.
- What may follow if the default is not cured, such as acceleration of the balance and foreclosure or forfeiture, as your documents provide.
- Any statement your documents or state law require, such as the payer’s right to reinstate after acceleration or to raise a defense in court.
Keep the tone factual and the facts exact. A notice that threatens action you cannot take, adds fees the note does not allow or overstates the amount can hand the payer a defense later, and it can break debt collection rules where they apply. Some states apply those rules to a holder collecting its own loan, so being the original lender does not put you outside them.
A worked example
Illustrative figures only. The note calls for $900 a month, due on the 1st, with a 15-day grace period and a 5% late charge on any payment received after it. The payer has missed March and April and has not paid May. A notice dated May 10 might itemize:
| Item | Amount |
|---|---|
| March, April and May payments (3 x $900) | $2,700 |
| Late charges on March and April (2 x $45) | $90 |
| Total to cure | $2,790 |
No late charge appears for May, because on May 10 that payment is due but still inside its grace period. Attorney fees are left out as well, unless the note allows them and state law lets you charge them at this stage. If the cure deadline falls after June 1, the notice should also say that the June payment must be made, and your attorney can confirm the wording.
Sending it
Deliver the notice the way the notice clause says, usually by mail to the property address or to another address the payer has given you in writing, and sometimes by a set method such as certified mail. Many holders send the same notice by first-class and certified mail together and keep both receipts. If two people signed the note, send it to each of them. A copy goes in the loan file with the payment record.
If a servicer collects for you, it will usually send the notice on your instruction, using its own forms. Read the draft anyway, because the figures and the deadline are your decisions.
During the cure period and after it
Be careful with partial payments while the deadline runs. Under some documents and in some states, taking part of the amount can waive the default or restart the clock, while elsewhere it is allowed with the right written reservation. Ask your attorney before you deposit a partial payment, and make no informal promises by phone. If the payer proposes a plan, put it in writing and have both of you sign it.
When the deadline passes there are three usual paths: a written workout with the payer, enforcement through the remedy in your documents (the difference between the two main remedies is in foreclosure vs forfeiture), or selling the note as it stands. Selling a note in default means a deeper discount, the gap between the balance owed and the price paid, because the buyer takes on the cost and time of enforcing. How those notes are priced is set out in selling a note when the payer has stopped paying. A full note sale is without recourse to you, so once it closes the default is the buyer’s to deal with, though the statements you make about the note in the sale still have to be true. If you want a figure before you decide, send us the note with the default included. Quotes are free, and keeping the note and enforcing it yourself is a perfectly good outcome.
Keep the paper trail
A properly sent notice helps whichever path you take, because it fixes the facts in writing on a known date. An attorney will start from it, a court may look at it, and a buyer pricing the note will ask for it along with the payment record. Keep the notice, the proof of mailing, any reply from the payer and your notes of every call in one folder. A file that is complete and in date order saves you from sending the whole thing again.
Related questions
Can I write a notice of default myself?
You can draft one, but have an attorney in the property's state review it before it is sent. The content, cure period and delivery are set by your documents and state law, and a defective notice can delay foreclosure or forfeiture.
How long does the payer get to cure a default?
Whatever your documents and state law require. Many widely used standard forms call for at least 30 days from the notice, but private notes vary, so read the default and notice sections of yours.
Can I add attorney fees to the amount in the notice?
Only if the note allows them and state law permits charging them at that stage. Adding fees the note does not allow can give the payer a defense later.
Should I accept a partial payment after sending a notice?
Ask your attorney first. Under some documents and in some states, accepting part of the amount can waive the default or restart the cure period.