When is a loan servicer required to send a Notice of Default?

A loan servicer is required to send a Notice of Default when a borrower has missed multiple mortgage payments. This occurs after the borrower has typically fallen behind on their loan obligation to a significant extent, reflecting a serious breach of the loan agreement. The Notice of Default serves as an official notification to the borrower that they are in default due to non-payment, and it is the first formal step in the foreclosure process.

Sending this notice after multiple payments have been missed gives the borrower an opportunity to resolve the default, either through repayment or some other means, before any further action is taken, such as foreclosure. This process is designed to ensure that borrowers have a clear understanding of their situation and the potential consequences if the missed payments are not remedied, ultimately allowing them to take necessary steps to avoid losing their property.

In contrast, sending a Notice of Default upon the first missed mortgage payment would not allow the borrower adequate time or options to rectify the situation. Similarly, waiting until after payment arrangements have failed might miss earlier intervention opportunities and could be less helpful for the borrower. Lastly, sending a notice after the property has been listed for sale would not align with the intent of notifying the borrower about their current default status and enabling them to take corrective actions beforehand.