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No homeowner sets out wanting to conduct a short sale, but at the same time, you'll probably be glad to consider it, because if your Realtor, banker or lawyer suggests it as an option, that likely means you're behind in your payments, you're looking at the very real possibility of losing your home and your only other viable alternative -- foreclosure -- is worse.

No need to consult the dictionary...

Think of a short sale as a do over, or a settlement. It's an agreement with your mortgage company that you're going to sell your home for less than what is owed on the house. So maybe you have a $300,000 house, and you owe $275,000, but the market has tanked, and you're confident your house won't sell for what you owe, or perhaps you even have an interested buyer, who will pay, say, $195,000 but nothing more.

In a short sale situation, your mortgage company decides the minimum amount it'll be happy to receive -- and that's what you'll sell the house for. When the dust settles, you've sold your house for money that your bankers will get. Someone else buys your house, and you're sent packing. It isn't exactly the happy ending you were looking for when you first bought your house, but you've avoided the pain, stigma and credit decimation of a foreclosure.

Best of all, perhaps, you no longer owe a dime to your banker and can move onto the next chapter of your life.

Introducing: the pilot program

The Fannie Mae program is exciting for Realtors and should be for beleaguered homeowners because -- well, RE/MAX real estate agent Gayle Henderson puts it this way: "Short sales have had a reputation for being very drawn out, complicated, where a long period of time goes by, and you're waiting, and you don't know what price the lender is going to approve your home for."

Henderson isn't just a Realtor; she's a distressed property expert. She specializes in trying to save homeowners facing foreclosure, by taking them through options like loan modification, loan refinancing and, yes, short sales. And through the Arizona Regional Multiple List System, she is one of the Realtors working with Fannie Mae on this pilot program, which began at the end of December and is poised to last through March. After that, Fannie Mae will study the results along with agents like Henderson, and its partner, Countryside, and if they deem it successful, as in the stress levels and wait times have been reduced significantly, it will expand nationally.

So far, so good, from Henderson's point of view. The publication U.S. Banker also reports that the buzz on the program has been positive.

Even if it doesn't go forward...

A maddeningly long short sale process is still better than going through foreclosure, maintains Henderson. True, your credit will take a beating through a short sale as well, but at least "a lender is more than likely going to report that your loan has been satisfied, and even if they say that it's satisfied for less than the amount owed, that avoids the stigma of foreclosure," says Henderson. "For instance, if it asks you on a job application if you've ever had to foreclose, you can honestly say that you haven't."

Homeowners aren't the only ones who don't want to foreclose. It's the absolute last outcome the bank wants, no matter how soulless and heartless the anonymous corporate financial institution may seem to a frustrated family struggling to hang onto their home. It's in the bank's best interest to conduct a short sale over kicking a family out to the curb.

"For obvious reasons, the lender is not in the business of acquiring a house," says Henderson. "They're in the business of lending money. Most people might think a house is a great asset -- well, it's not. Not for a bank. Not only have they lost the potential of income from the loan, they have an albatross on their hands that they now have to feed and water, like worrying about paying property taxes and keeping up with homeowner association regulations. What if the house has a swimming pool to be maintained, and there's a lawn to mow? They might lose $65,000-$70,000 per property if they wait until they go to foreclosure. Multiply that by the number of loans that are out there, and you can see they want to get these short sales accomplished sooner."

GO TO: Part 1: Financial Health and Recovery

GO TO: Part 2: Refinancing and Home Equity

GO TO: Part 3: Home Value

GO TO: Part 4: Real Estate Investing

GO TO: Home Finance Guide

More on FrontDoor:

• Foreclosure Guide
• First-Time Homebuyer's Guide
• Home Seller's Guide
• Tools and Calculators
• The Skinny on the Short Sale
• 5 Ways to Stop the Foreclosure Process