Short sales on Fannie Mae and Freddie Mac homes (that's 57% of U.S. mortgages) nearly quadrupled in the first nine months of 2009 compared with the same period in 2008. At the nation's largest mortgage servicers, short sales soared 165% to 74,513 in the first nine months of 2009 from the year-earlier period.

Resistance is softening. Banks and investors are increasingly willing to agree to a short sale as a less costly option to foreclosure.

A short sale appeals to the struggling homeowner because they can solve the mortgage payment problem without having a foreclosure on their credit history. Their credit won't go undinged; there are usually tax consequences, and any money they may have invested in the home (down payments, renovations) will be lost. But they get to walk away from the problem, start anew, avoid the stress of impending foreclosure. To many, this is a highly attractive option.

According to a recent study, prime loans took a loss of 45% in a foreclosure, compared to a loss of 35% in a short sale. Plus the property does not sit vacant, exposed to weather and vandalism.

However, the biggest challenge for the short sale option is its very popularity: Most banks can barely handle the load. 

Representatives of Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp. said their companies had assigned more employees to handle short sales. But the sheer volume of requests has made it difficult to keep up.