Breach Letter

Breach letter is a formal notice sent by the lender, servicer, or their attorney to a borrower informing them that they have violated one or more terms of their mortgage agreement — most commonly by failing to make payments — and that the breach must be cured within a specified period, typically 30 days. The breach letter identifies the specific covenant violated, states the amount or action required to cure, and warns that failure to cure may result in the lender invoking the acceleration clause and initiating foreclosure.

Most mortgage and deed of trust agreements contractually require the lender to send a breach letter before accelerating the loan, making it a legal prerequisite rather than an optional step. In the secondary note market, breach letters are closely related to demand letters (NOI) — in practice, many investors and attorneys use the terms interchangeably, though a breach letter specifically references the contractual violation while a demand letter may focus more broadly on the total amount owed and the intent to foreclose. Investors acquiring non-performing loans should verify during due diligence whether a proper breach letter was sent by the prior holder, as missing or defective notices can delay foreclosure timelines or create legal challenges.