Not to worry, your mortgage is $200,000 and your house is worth only $150,000. Fannie Mae to the rescue. Fannie Mae will let you sell your home at $150,000 and Fannie Mae will take the loss. You don't even need a buyer for your home!
This situation is called being "upside down," which means that you owe more than the house is worth. Selling your home when you are "upside down" is called a "short sale."
This is not a new practice. It has been used before but never without a buyer. Most deals fell through because the paper work took too long or because lenders, servicing firms and mortgage guarantors rejected the sales price. For these reasons, "short sales" have a bad reputation among real estate agents.
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