It is possible,...
It sounds to me as though your agent / broker started to work on your short sale and communicated with your lender, and the lender conveyed that they are foreclosing as the investor may not allow short sales.
This has happened to me before. Some lenders do not do Short sales at all.
Please understand, there is a servicer for your loan ( the company you pay your mortgage to ) and they in turn pay the actual lender or investor.
The Lender is the investor on the loan and makes that decision. The actual lender is rarely the bank you deal with.
Some investors do not allow short sales at all.
Harold Sharpe - Broker
So Cal Homes Realty
California Department of Real Estate License # 01312992