What is the term for a sale in which the lender accepts less than the owed amount to release the mortgage?

A short sale is a transaction in which the lender agrees to accept a payoff that is less than the total amount owed on the mortgage. This situation typically arises when the homeowner is facing financial distress and cannot keep up with mortgage payments. By accepting less than the owed amount, the lender enables the sale to proceed, allowing the property to be sold on the market while avoiding the lengthy and costly process of foreclosure.

In a short sale, the homeowner usually needs to provide financial documentation to the lender, demonstrating their inability to continue making payments. This agreement not only helps the homeowner avoid foreclosure but also allows the lender to mitigate potential losses associated with a foreclosure process.

The other options refer to different scenarios: foreclosure involves the lender taking possession of the property due to the borrower's failure to pay, a deed in lieu of foreclosure is when the borrower voluntarily gives up the property to the lender to avoid foreclosure, and mortgage satisfaction refers to the process of paying off a mortgage in full. Each of these terms describes a different aspect of the mortgage process that does not involve accepting less than the owed amount for a sale to occur.