How to Respond to a Notice of Default

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A Notice of Default, also known as a NOD, is a letter that a lender sends you to let you know you are behind on payments on a loan and that you've therefore violated your loan contract. Usually, these letters are given out for defaults on mortgage loans, but technically, you can get a NOD for any loan that you aren't properly repaying. Responding to a NOD is imperative, as it shows the lender the next steps you are willing to take and how the lender therefore should proceed with your loan account.

Go over your loan contract and payment history to verify that you are in fact in default. As of November 2010, lenders and courts are swamped with foreclosures, particularly in states such as Michigan and Florida. With lenders and judges overwhelmed with paperwork, it's easy to make a bad mistake.

Check the NOD for the time limit that you have to respond. This will vary by state.

Call the lender or your attorney and have them explain anything in the letter that is confusing. You will have a hard time responding to the letter formally if you don't fully comprehend the contents.

Make a payment to the lender. This doesn't necessarily stall foreclosure or other legal action, depending on your loan agreement, but it can indicate to the lender that you intend to resolve the default and don't want further problems. Some lenders won't take a partial payment once they've sent a NOD and will require all of your backed payments to rectify the situation.

Write to the agency making the claim. Present evidence of why the NOD was improperly issued or why you legitimately cannot make payments. Ask the agency in the letter if they will take a lower monthly payment, total settlement or a payment plan.

Send a copy of your letter by certified mail. This will give you evidence that the agency actually received your letter.

Tips

  • Have your attorney review your letter before you send it. He can tell you if anything in your response would get you into further trouble.