Consumers have a number of alternatives to foreclosure which they may consider.

(1)  Loan Modification:  The government presented a Home Affordable Modification Program (HAMP) a few years ago to assist consumers in modifying their mortgages.  Lenders may have their own programs independent of HAMP.  There are a multitude of free government resources a consumer may utilize to pursue a loan modification with their lender.  Many of the lenders now require at least a consideration of modification before they will consider a short sale.

(2)  Strategic Default --- just "walk away".  DON'T DO IT!  This is a BAD option.  The lender will most certainly foreclose AND will likely pursue consumers who could have made their payments.

(3)  Short Sale - their are various programs and guidelines concerning short sales now.  Many times, pursuance of a short sale is the most favorable option for a consumer who must sell their home but find themselves owing more than they can sell the home for.  You may have heard of programs such as "HAFA --- Home Affordable Foreclosure Alternative", Fannie, Freddie or FHA (HUD) guidelines.  

(4)  Deed in Lieu - To quote the HUD site, A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from mortgagors who can financially make their mortgage payments.

(5)  Bankruptcy - some times it is to the consumer's benefit to pursue bankruptcy, having exhausted all economically viable alternatives.