A “short sale” may (finally) be a feasible way out.

Noticing that very few “short sales” have been going through, Fannie Mae has initiated a new, experimental program to make them much easier to execute: Pre-approval of the price.

The idea of a “short sale” is simple. Instead of letting your lender foreclose on your house, you sell it for the current market value and the lender agrees to accept that amount in full payment of the mortgage.

Obviously this is for those whose houses are “under water” (the mortgage exceeds the current value of the house). If you can no longer make the monthly payments — and you are facing foreclosure — this could be a good way out that is less damaging to your credit.

The problem with short sales is that the lenders have been taking forever to approve the sale amount — an average of more than 8 weeks last year — and in the end, they often turn down the amount offered. Meanwhile, the buyer has usually gone elsewhere.

Now, homeowners whose mortgage is backed by Fannie Mae can apply to Fannie Mae in advance and get agreement on an acceptable price. Then they can put the house on the market and be assured that any offer at that price will be accepted.

The other problem with short sales was that any money forgiven by the lender used to be income to the seller. So, if your mortgage was $150,000; you sold the house for $125,000, and the lender forgave you the other $25,000, the $25k would be counted as income to you. Fortunately Congress fixed that last year so it is no longer a problem.

Read more about mortgage types, interest rates and foreclosures

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