The U.S. government would rather see troubled homeowners refinance their home loans, modify their loans or, if all else fails, sell their homes in preforeclosure transactions to stave off foreclosure and clear the market.

The administration's May 14 initiative to facilitate short sales and deeds-in-lieu transactions encourages these attractive alternatives to foreclosure, and it follows efforts by Fannie Mae, Freddie Mac and a number of major banks to resolve default properties via short sales. Major servicers are expecting an eightfold increase in short sales by this summer.

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