Notice of Default

Basically, a foreclosure notice of default is a document that has to be recorded at the County Recorder’s Office and notice served to the home owner by the lender to start the process of foreclosure. In Utah typically the bank will hire a Trustee to handle the process. The foreclosure notice of default must be sent to anyone who has an interest in the property (any other loans, lenders, or even contractors who are owed money for work done to a property will get a copy).

The foreclosure notice of default must also be published in a newspaper or online and physically posted in a prominent place on the property itself. Although this can be really embarrassing to someone going through foreclosure, it’s actually a very important protection for consumers. In Utah, you typically have 3 months and 3 weeks to solve your foreclosure. Back before US law required a notice of default; people were sometimes foreclosed on without any warning. In fact, it’s happened even in the past few years – at least one bank has accidentally foreclosed on the wrong property and kicked people out of their house without due process or warning. The notice of default is a very important step within the foreclosure process that gives people with an interest in the property to step forward and claim their rights – before it’s too late.

Here are a few key steps you should take:

• Stay calm and don’t panic: This may sound obvious, but it’s probably the most important. Anyone in foreclosure is dealing with a lot of stress beyond just the property. These situations don’t happen overnight, and they take a while to solve. You’ll get through it by practicing good coping techniques and taking good care of yourself and your family. Panic leads to bad decisions, so stay cool. Remember, you have 3 months and 3 weeks in Utah to stop your foreclosure.

• Educate yourself: Learn everything you can about the foreclosure process in your state so that you know what’s happening and what’s coming up next. The main way to keep your house is to file a Chapter 13 bankruptcy, get a Loan Modification approved or get the money together to bring your loan current.

• Gather your resources: There’s also many non-profit and government resources available out there. You’ll want good legal and tax advice along the way. Definitely don’t try to do it all yourself. This stuff is super complicated with lots of rules.

• Communicate: The banks involved don’t want your property. They want money, and what you say matters a lot. You can slow down or stop the foreclosure process if you take the appropriate action. Call your bank and ask for the Loan Modification department. Chapter 13 bankruptcy or Modification are great ways to keep your house.

It’s been estimated that close to 625,000 homes in America were foreclosed upon in 2018. And while that number is nowhere near the amount reported at the height of the housing crisis in 2008, that’s still a sobering statistic for many homeowners⁠ particularly in Utah, where housing prices have been reported to have jumped at a rate of 4.5 percent annually since 1991. Foreclosure is never something any homeowner wants to ponder. It can be a lengthy process, and one which can take a heavy toll both emotionally and financially. And it’s a process you may wind up facing somewhere down the line. The future is never certain. Divorce, job loss, medical bills… all of these can wind up taking greater priority than you might have expected. But foreclosure is a process; and one whose steps you need to be aware of. You may have received a notice of default on behalf of your lender recently, and wondered just what it was and more importantly, how it might affect you. Unfortunately, it’s not something you can ignore. But it is something you need to prepare for.

How Does A Notice Of Default In Utah Affect My Property?

Utah generally operates as a title theory state, where a property title remains in trust to a lender (or an appointed trustee) until the initial agreements of a loan is paid off. However, a title theory state administers foreclosures non-judicially meaning sales and notices of default are not approved through court hearings, instead, they’re administered through clauses in the mortgage contract itself, allowing a lender to legally serve you with foreclosure notices. In Utah, this involves a three step process:

• Notice to Default To Trustor: Before a foreclosure proceeds with a notice of default, a lender must legally offer a homeowner an opportunity to negotiate any money owed. It’s not unheard of for Utah-based lenders to send a notice to default to trustors after as little as 2-3 consecutively missed payments. While some institutions can sometimes allow you a chance to refinance your mortgage, you’ll find more often than not they can be fairly unsympathetic. They want any and all back money owed on your existing mortgage paid in full—typically in 30-60 days. For some of you, that may be realistic. But for most? Probably not. It’s better to think of a notice to default to trustor as a “final warning” before foreclosure proceedings are initiated.

• Notice Of Default: As indicated previously, a notice of default is not something to take lightly. It means that the minor leeway a lender may have offered you has closed and you’ve defaulted on your loan. A financial institution can now legally proceed with any foreclosure sales or auctions at their express given consent. A notice of default is filed within a county recorder’s office and must be mailed to a borrower no later than ten days after being recorded. However, Utah does have a unique conveyance known as a reinstatement of mortgage which allows homeowners to get an additional three month stay after receiving a notice of default in order to pay off back debts. You have 3 months to bring your mortgage current after you receive a notice of default. Partial payments will not be accepted without approval from your bank and will typically require a loan modification approval.

• Notice Of Sale: Both a notice of default and a notice of sale are a matter of public record; and will frequently be published in your local county newspaper (or online.) This can not only affect both your credit rating and subsequent ability to borrow or refinance, but increasingly your job status (if you’re seeking new or alternate employment.) Recently, many major employers are taking character skills and responsibility in reviewing the status of new applicants; and while it may seem entirely irrelevant to your qualifications, defaulting on a loan can unfortunately prove to be a barrier. A notice of sale listing its date and location is sent out by certified mail no later than 20 days prior to the sale itself. Assuming you have not made prior negotiations with your lender regarding new payment arrangements, you may find that the sale will be final. While some states may offer a right of redemption for homeowners to purchase back their property after a foreclosure, Utah is unfortunately not one of them.

How Do I Avoid A Notice Of Default?

The easiest way to avoid a notice of default is often the most unrealistic one for many homeowners. It simply requires paying off any and all mortgage debt in full upon receiving a notice of default to trustor. Lenders, as we stated, are frequently unsympathetic to your given circumstances. However, no two financial institutions are alike. You may have both an excellent history and rapport with your given lender; and you can sometimes find that debt rearrangement plans can be easily obtained provided you have a long standing history with your bank. The next step is to use the three month mortgage reinstatement period to pay off both back debts, fees and scheduled payments. Many homeowners find they’re simply in temporary financial arrears, and this particular grace period offers more than enough time to catch up. A short sale will allow you the opportunity to sell your house if you owe more on your house than you will get with a traditional sale. A short sale is a long and drawn out process. Your bank has to approve the sale price of your house in a short sale, and many times your mortgage company will not approve a short sale. You may not want to pay broker fees, inspection services and property title fees out of the sale; particularly if you have less than 90 days prior to foreclosure.

Notice of Intent to File a Notice of Default (Pre foreclosure Notice)
Before the bank or servicer (the company that handles mortgage accounts on behalf of the bank) can officially start the foreclosure, it must mail the borrower a notice of intent to file a notice of default. This pre foreclosure notice must include, among other things, information about:

• who the borrower can contact to find out about getting a loan modification or other foreclosure relief, and
• provide 30 days to pay the amount due to cure the default and avoid the filing of a notice of default.
Power of Sale Notice Requirements:
• Prior to initiating a foreclosure, the lender must file a notice of default in the county in which the property is located and with the defaulting borrower within three (3) months of the default. A copy of the notice of default must be published at least once a week for three (3) consecutive weeks in a newspaper of general circulation in the county, with the last notice of sale published at least 30 days before the proposed sale. A notice of the proposed sale must also be recorded with the recorder where the trust property is located.
• The notice of default must contain certain information, including the date, time and place of sale, a description of the default, the lender’s election to sell, and the document recording information from the deed of trust.
• Foreclosure sales must take place as a public auction between 9AM and 5PM on a business day at the time, place and date designated in the notice of sale. The trustee auctions the property to the highest bidder. The foreclosure sale may be postponed for 45 days from the original sale date if written notice is provided to the original recipient of the notice of default.

In Utah, the lenders can also go to court in a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. A complaint is filed in court along with a lis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed. Judicial foreclosure in Utah is an option which generally follows the same procedure as a non-judicial foreclosure, with the distinction that the process is pursued through the courts. The property is then sold as part of a publicly noticed sale.

What are the legal instruments that establish a Utah mortgage?
The documents are the trust deed, and in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement. Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, as set forth in the note.

How long does it take to foreclose a property in Utah?

Depending on the timing of the various required notices, it takes approximately 120 days to complete an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and postponements of sale, or files for bankruptcy.

Is there a right of redemption in Utah?

Utah has a post-sale statutory right of redemption for judicial foreclosures, which would allow the borrower to reclaim the property by making payment in full of the sum of the unpaid loan, plus costs. The court may extend the redemption period.

Are deficiency judgments permitted in Utah?

Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage or deed of trust secures.

What statutes govern Utah foreclosures?

The applicable laws are found in Title 57 Utah Code (Conveyances) Chapter 1, et seq. Mortgage foreclosures are referenced in Title 78, Chapter 37.
What’s the difference between a notice of default and notice of sale in foreclosure?

Non-judicial Foreclosure

When you take out a loan in a state that allows non-judicial foreclosures, you will likely sign a deed of trust or a mortgage, which contains a power of sale clause. This clause gives the trustee—a third party that manages the non-judicial foreclosure process in certain states—the right to sell the home though an out-of-court process if you stop making payments. Sometimes, depending on state law, a non-judicial foreclosure process begins when the trustee records a Notice of Default (NOD) at the county recorder’s office.
The NOD serves as public notice that the borrower is in default. The NOD often contains:
• the name and address of the borrowers
• the name and address of the lender
• the name and address of the trustee
• the address and/or legal description of the mortgaged property
• a description of the default
• the action required to cure the default
• the date by which the default must be cured, and
• a statement that if the default is not cured by the deadline, the lender intends to sell the mortgaged property at a public sale.
If the borrower does not “cure” the default by bringing the payments up to date including late charges and foreclosure fees the trustee might (again, depending on state law) then prepare and file a Notice of Sale for the property.

Notice of Sale

The Notice of Sale (NOS) generally states:
• the property address and/or legal description
• a statement that the property will be sold at a public auction, and
• the date, time, and location of the foreclosure sale.
The NOS might be recorded in the county land records, mailed to the borrower, published in a newspaper of general circulation in the county where the home is located, as well as posted on the property and/or in a public place.
Differences from State to State
While you might get both a Notice of Default and a Notice of Sale as part of the non-judicial foreclosure process where you live, foreclosure procedures and the documents you will receive do vary widely from state to state. You might get:
• a Notice of Default followed by a Notice of Sale
• a combined Notice of Default and Sale (or similar document)
• a Notice of Sale stating that the property will be sold on a certain date, or
• notice by publication in a newspaper and posting on the property or in a public place.

What’s a default notice?

This is a letter from your creditor warning that your account is about to default because you’re behind with your payments. The default notice will give you at least two weeks to catch up with any missed payments. If you can do this your account will carry on as normal. If you can’t pay the missed payments in this time your account will default. A default notice is normally sent when you’ve missed, or paid less than the full amount for 3 to 6 months. Default notices only apply to debts which are regulated by the Consumer Credit Act, such as credit and store cards, payday loans, personal loans and hire purchase.

How do I recognise a default notice?

A default notice has the following text at the top in large or bold letters:
• ‘Important you should read this carefully’
• ‘Default notice served under the Consumer Credit Act
The default notice will also give you the following information:
• How much you need to pay to bring your account back up to date
• The deadline to make this payment – you must get at least 14 days to do this