MLO Mentor is an ongoing series covering compliance best practices for mortgage loan originators (MLOs). This article discusses the Notice of Default (NOD) and Notice of Trustee’s Sale (NOTS).
The notice of default and election to sell
When ordering a trustee’s sale guarantee from a title insurance company, the trustee instructs the title company to record the NOD in the office of the county recorder in the county where the real estate is located. [CC §2924(a)(1)]
The NOD contains statutorily mandated statements which set forth the monetary default on the note or other obligation secured by the mortgage. [CC §2924c(b)(1)]
The monetary default statement informs the owner:
- they need to continue to pay other obligations required of them by the mortgage, such as hazard insurance premiums and property taxes; and
- if they do not make future payments on the obligations in default, the owner is required to make the payments to reinstate the loan.
The NOD does not need to state the actual amounts of the monetary defaults on the recurring obligations. However, the NOD needs to state the nature of the present defaults on the mortgage. [CC §2924c(a)(1)(B)]
A summary of the NOD needs to be attached with the NOD. [See RPI Form 471-1]
Further, if the mortgage was originally negotiated in one of five languages other than English, the summary is to be provided in that language. These languages are:
- Chinese;
- Korean;
- Spanish;
- Tagalog; or
- [CC §2923.3; see RPI Form 474-1 through 474-6]
To determine the amount needed to cure the default, the NOD directs the owner seeking to reinstate the mortgage or redeem the property to contact the trustee. Thus, the trustee insulates the mortgage holder from all direct contact with the owner or junior mortgage holder after the date the NOD is recorded until cancelled or a trustee’s sale occurs.
If the NOD does not list a default known to the mortgage holder at the time of recording, the unnamed default does not need to be cured for the loan to be reinstated. [In re Peters (9th Cir. BAP 1995) 184 BR 799]
However, the mortgage holder may later record a separate NOD to notice the omitted default, and pursue a separate foreclosure based on the omitted default. [CC §2924(e)]
Delivering the NOD
Within ten business days after recording a NOD, two copies of the NOD are mailed to:
- the owner of the property;
- the administrator of a deceased owner’s estate; and
- each person who has recorded a request to receive a copy of the NOD. [Estate of Yates West End Financial Corporation, Inc. (1994) 25 CA4th 511; CC §2924b(b)(1)]
One copy of the NOD is sent by registered or certified mail, the other copy is sent by first-class mail. [CC §2924b(b)(1), (e)]
Within one month after recording the NOD, the trustee sends a copy of the NOD by registered or certified mail and another copy by first-class mail to holders of a recorded interest in the mortgaged property, including:
- the owner’s successor-in-interest;
- any junior mortgage holder;
- the assignee of a junior mortgage;
- a buyer on a land sales contract;
- a lessee on a lease; and
- the state Office of the Controller, if a Notice of Lien for Postponed Property Taxes is recorded against the property. [CC §2924b(c)]
Any other person interested in obtaining a copy of the NOD records a request for NOD. The request for NOD assures the interested person they will be notified of the default. [See RPI Form 412]
A trustee or person depositing the NOD into the mail to give notice to others prepares a proof of service and includes a copy of the form with the NOD in each mailing. [CC §2924b(e)]
The notice of trustee’s sale
A trustee or mortgage holder may begin noticing the date set for the sale of a property on the day following three months after the NOD is recorded. [CC §2924(a)(3)]
The date of the sale may be set for any business day, Monday through Friday, between the hours of 9 a.m. and 5 p.m. [CC §2924g(a)]
In general practice, a date down of the trustee’s sale guarantee issued to the trustee is ordered out from the title company the day before or on the day the title company records the NOTS.
The date down notifies the trustee of any interests recorded on the title to the property after the NOD is recorded. However, the trustee is not required to give notice of the impending trustee’s sale to any person who recorded an interest in the property after the NOD was recorded. [CC §2924b(c)(1)]
The trustee prepares an NOTS which contains:
- the trustee’s name or their agent’s name, street address and telephone number (or toll-free number if located out of state);
- the street address or common designation of the mortgaged property;
- the county assessor’s parcel number of the mortgaged property;
- the dollar amount of the debt in default, including reasonably estimated advances for hazard insurance premiums, property taxes due and foreclosure costs; and
- a statutory statement informing the owner they are in default. [CC §2924f]
If the billing address of the defaulting borrower is different from the mortgaged property’s address, an additional notice needs to be posted on the property concurrent with the NOTS. The notice states in English and five other mandated languages that any tenant has the right to a 90-day notice to vacate the property. A copy of the tenant’s rights is also to be mailed at the time of posting to the “Resident of property subject to foreclosure sale.” [CC §2924.8(a); see RPI Form 474-1]
Like the NOD, the NOTS needs to contain a summary of key information in the language the mortgage was originally negotiated in. [CC §2923.3; see RPI Form 474-2]
Note that if the mortgage was negotiated in Spanish, the mortgage may contain a request for a Spanish-language NOD. The trustee is then obligated to serve the owner an NOD translated into Spanish. [CC §2924c(b)(1)]
Delivering the NOTS
At least 20 calendar days before the trustee’s sale, the trustee sends two copies of the NOTS to each party the trustee previously sent the NOD. [CC §2924b(c)(3)]
As with the NOD, one copy of the NOTS is sent by registered or certified mail, while the other is sent by first-class mail. [CC §2924b(b)(2), (e)]
To ensure the sale at a public auction is properly advertised, the notice requirements for the NOTS are more comprehensive than the notice requirements for the NOD. In addition to mailing the notice to all interested parties of record, the trustee performs all of the following at least 20 calendar days prior to the sale:
- post a copy of the NOTS in one public place in the city of the sale, or if the sale is not to be held in a city, the judicial district in which the property is to be sold;
- post a copy of the NOTS in a conspicuous place on the property to be sold; and
- start publishing a copy of the NOTS once a week for three consecutive calendar weeks in a newspaper of general circulation in the city where the property is located. [CC §2924f(b)(1)]
Lastly, a trustee’s sale is held in the county where the mortgaged real estate is located. If the property or properties being foreclosed are located in two or more counties, the trustee’s sale may take place in any one of the counties. [CC §2924g(a)]