What term describes when a lender agrees to accept less than the current principal balance from a distressed homeowner?

The term that best describes when a lender agrees to accept less than the current principal balance from a distressed homeowner is a short sale. In the context of real estate, a short sale occurs when the homeowner sells their property for less than the amount owed on the mortgage, with the lender's consent to accept the reduced payoff. This process usually happens when the homeowner is experiencing financial hardship and unable to continue making mortgage payments.

In a short sale situation, the lender recognizes that foreclosure may be a more costly and time-consuming option. By agreeing to a short sale, the lender can minimize losses by allowing the homeowner to sell the property at its current market value, even if that amount is lower than the loan balance. The lender typically evaluates the homeowner's financial situation to ensure that accepting a lesser amount is the most viable solution.

Other terms like foreclosure, loan modification, and eviction all refer to different processes related to distressed homeowners. Foreclosure is the legal process by which a lender seeks to recover the balance of a loan from a borrower who has defaulted, typically resulting in taking possession of the property. A loan modification involves changing the terms of the existing mortgage to make payments more manageable for the borrower, rather than forcing a sale. Eviction refers to the legal