SHORT SALE : Where a mortgage lender agrees to accept less than what they are owed in exchange for the lender releasing their mortgage against a property.  Typically done to prevent foreclosure.

WORKOUT OPTIONS: Options available to troubled homeowners other than a short sale, including but not limited to: a) deed in lieu of foreclosure, b) cash for keys agreement, c) reaffirmation of mortgage upon sale, d) new promissory note signed with lender upon sale, e) mortgage modification (i.e. lower interest rate, extended time to pay past due balances, etc.).

LOSS MITIGATION: When a lender determines that a workout option may be more beneficial to the lender than proceeding with a foreclosure.

POTENTIAL PITFALLS:
1) Income Tax Liability
2) Deficiency Liability to Lender
3) Compromised Credit

BENEFICIAL RECENT LEGISLATION FOR HOMEOWNERS:
-Mortgage Forgiveness Debt Relief Act of 2007