1. "I already received a Notice of Default, so it's too late to do anything."  Not true. If a lender sees a good intervention program with some kind of loan workout or even with a short sale, the lender usually stays the proceedings and works with the owner.

2. "My credit score is awful, so no lender will work to refinance." Nope. Granted, the better the score, the better the owner's chances. But even if default proceedings have started, lenders will refinance in many circumstances. If no Notice of Default has been received, an owner's chances are pretty decent.

3. "The bank wants my house because they can make more money that way."  No, no and no. Estimates of how much a lender loses with a foreclosed house range from 30% to 70%. Let's just say it's a lot.   Believe me, the lender does not want your house, especially in the current market.

4. "I can just declare bankruptcy and walk away."  Maybe, but probably not. You would really need some legal advice on this one from a bankruptcy attorney. Your credit will certainly be trashed.

The issue facing both owner and lender is dealing with a big loan when the  house's value is dropping, often to substantially less than the loan amount. It's not just the owner's problem, note.  It's the lender's, too. For better or worse, you and your lender are in it together, and cooperation can get you both a out of a jam.