Facing Foreclosure
If your lender has been contacting you for several missing payments, it is likely they have already begun the foreclosure process. This takes varying lengths of time depending on the state and the motivation of the bank. However, eventually they move to the end of the process. The further along, the less likely they are to work with you and the more costly it becomes.
Bankruptcy
Many attorneys will recommend filing for bankruptcy to stop the proceedings. This will work for about a year and then you are back where you are currently AND you have a bankruptcy on your credit report.
Deficienty Judgment
It is possible that a foreclosure or deed in lieu will not cover the amount owed and the bank may still pursue the homeowner for a deficiency judgment to recover the remaining amount. While this does not happen often it is alway a possibility. A deed in lieu is simply turning the property over to the lender without the court proceedings. It is only slightly better than a foreclosure on the credit report.
Right of Redemption
After as property has been foreclosed, most states offer the homeowner a right of redemption. That is the ability to reclaim the property by paying off the loan. This does not happen often either, but we have done this in the past.