According to RealtyTrac, foreclosures spiked again last month.

Two things are different with the latest wave of foreclosures.  The first is that many "optional payment" loans, also called "pick-a-payment loans" and--this is the truth--"Smart Choice loans--"are re-setting. Under these programs, borrowers had a choice of what payment they wished to make.  Unpaid principal got tacked onto the loan balance.

The second significant phenomenon is that many mortgages are going into default because the borrowers lost their jobs and could no longer make the payments.  What may be critical, here, is that many of these home owners have significant equity in their homes.

Critical, because if you're their lender, will you consider a short sale? A loan modification? A deed in lieu? Or would you think that foreclosing on a house with equity and selling it as REO might--just might--help you make up some of the principal losses you were taking by allowing short sales on upside down homes elsewhere?

Here's what you will read here first: Lenders will foreclose on homes with equity.  And at the same time, they'll figure out how to speed up short sales on properties where they can cut their losses.