Meltdown 101: What is a short sale of a home? (AP)

BusinessWeek - Home prices have dropped as much as 50% in some parts of the country, and many readers in those areas keep asking what they can do to stop the bleeding? In my last article, I described various strategies available to lower your monthly mortgage payments. But what options do you have if you are so far underwater that refinancing is not feasible and you are desperate to get out from under? The short answer is the short sale. What is a short sale? It is when you sell your home (including sales commissions and other closing costs) for less than you owe on the mortgage. ...

Q. We have to relocate because of my husband's job. Our home value has fallen nearly $100,000. We would like to get rid of it, but we don't want to go into foreclosure. Someone mentioned a short sale. What impact would that have on our credit rating?

John Lounsbury submits:David Streitfeld has an interesting article this morning in The New York Times discussing the outlook for an increase in the number of housing short sales and government efforts to facilitate these. A short sale is one in which the lender agrees to accept a sale price less than the outstanding mortgage balance.

Fraud Thursday continues as Bloomberg reports on the latest scam: Banks Face Short-Sale Fraud as Home ‘Flopping’ Schemes Spread: “Two Connecticut real estate agents found a way to profit in the U.S. housing bust: Buy low, sell fast. Their tactic was also illegal.

Billionaire investor claims investment bank wronged him in short sale gone awry.

Kimball Corson submits: There was a big jump in real estate short sales in January. A short sale is one made by a lender on a foreclosed or repossessed parcel of real estate, typically a house, at a price below the balance due on the property. This is a big adjustment, on average, but one needed to induce buyers to undertake the risk of further declines in real estate prices and lenders to get the properties off their books.

Jim Mahar submits: From the New York Times' DealBook Blog (Lawmakers Find S.E.C.’s Short-Sale Rule Lacking):

Investopedia submits: One thing's for certain: unless a company goes bankrupt, short sellers eventually have to cover. And when they do, there's invariably a spike in price. That's why it's worth keeping tabs on short-interest data, and in particular, the "short interest as a percentage of float" data.