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Recording the notice of default (NOD)

When a mortgage is in default and the mortgage holder has chosen to foreclose, the mortgage holder hands a declaration of default and demand for sale to the trustee.

The declaration contains instructions directing the trustee to initiate foreclosure on the mortgaged property as authorized under the power-of-sale provision contained in the mortgage.

Even though the trustee may have received the mortgage holder’s declaration of default, the trustee’s foreclosure process and the periods imposing rights and obligations do not begin until the trustee or mortgage holder records a notice of default (NOD). [System Investment Corporation v. Union Bank (1971) 21 CA3d 137; see RPI Form 471]

Once the NOD is recorded, the trustee is required to strictly comply with statutory notice requirements. To be assured the required notices are served on all the proper persons, the trustee orders a trustee’s sale guarantee from a title company before or at the time the NOD is recorded.

The trustee’s sale guarantee provides coverage to the trustee for failure to serve notices on any party due to an omission of that person’s identity in the guarantee.

The trustee’s sale guarantee contains:

  • the name and address of each person who has recorded a request for a copy of the NOD;
  • the name and address of each party with a recorded interest in the real estate securing the obligation in default;
  • any junior (later recorded) easements and to whom the easements were granted;
  • the property’s legal description;
  • a plat map locating the property; and
  • the names of the newspapers in general circulation in which the  NOTS, and the NOD if necessary, are to be published.

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. [Calif. Civil Code §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); CC § 2924(a)(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); CC §2924c(a)(1)(C)]

For one-to-four unit residential property, a summary of key information contained in the NOD needs to be attached to the NOD. The summaries do not have to be published or recorded. [CC §2923.3(c); 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
  • Vietnamese. [CC 2923.3(a); 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)]