Can a Home be Sold for Less than its Mortgage

Dubbed a "short sale", home sellers who are upside down on their mortgage and the home's value can sell for less than the amount of the mortgage. Sometimes home owners can negotiate with lenders and have them split the difference between the sale price and loan amount, which still must be paid. A short sale may be complicated if the loan has been sold into the secondary market because then the lender will have to get permission from Fannie Mae or Freddie Mac to negotiate a short sale. Fannie Mae says the secondary market giant has a policy of looking at each loan individually. If the loan was a low down-payment mortgage with private mortgage insurance (or PMI), then the lender also must involve the mortgage insurance company that insured the low-down loan.

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