Short Sales Falling Below Expectations

Underwater mortgages have become more of a problem as of late, encouraging the federal government to establish the Home Affordable Foreclosure Alternative - a measure legislators hoped would provide a short sale option to homeowners. Under the program, lenders are advised to offer short sales to borrowers who are ineligible for a mortgage modification loan.

Short sales allow homeowners to pay off their mortgage for an amount lower than their outstanding balance. Although this option is more financially advantageous to a lender than foreclosure, some banking institutions are refusing to agree to these transactions, according to the Philadelphia Inquirer. Others are approving short sales, but failing to forgive a homeowner's remaining debt, forcing them to settle the debt with their bank, the newspaper added.

As a result, fewer Americans use this option and either continue to pay more on their home than their property is worth or default on their mortgage and fall into foreclosure.

To stem the foreclosure crisis, federal, state and local initiatives have become more prevalent nationwide to provide debt relief options to homeowners. In some cases, lenders, such as Fannie Mae, have established their own modification and relief programs to help consumers find other repayment options.