Housing Counselor Certification (HUD) Practice Exam

In the non-judicial foreclosure process, what action does a servicer typically take?

1. Files a lawsuit

2. Issues a Notice of Default (NOD) to the borrower

3. Negotiates a repayment agreement

4. Calls the borrower for clarification

The correct answer is: Issues a Notice of Default (NOD) to the borrower

In the non-judicial foreclosure process, a servicer typically issues a Notice of Default (NOD) to the borrower as one of the first formal steps in the foreclosure timeline. This notice serves as an official communication informing the borrower that they have fallen behind on their mortgage payments. It outlines the specifics of the default, including the amount owed and the timeframe given for the borrower to remedy the situation before further action is taken. The issuance of the NOD is crucial for compliance with state regulations that govern the non-judicial foreclosure process, as it helps to ensure that the borrower is made aware of their financial standing and the potential consequences of continued non-payment. It effectively triggers a series of rights and options for the borrower, such as the ability to cure the default or enter into discussions for loss mitigation. This step is vital as it provides the borrower an opportunity to address the issue before the foreclosure progresses. In contrast, the other actions mentioned in the choices would not be typical steps taken in the non-judicial process. A lawsuit would be more relevant in a judicial foreclosure scenario, while negotiating a repayment agreement or simply calling for clarification may occur, they are not formal steps that a servicer would take as part of the non-jud