Actually, one is allowed to hand the house back to the bank. The dangers of short sales is that you may end up owing taxes on it that's more than when you got from the sale. Deed in lieu of foreclosure will not have any effect on your credit rating and you walk away without any further financial responsibilities or obligations.
Also, if it's a FHA or VA loan, she can contact HUD who has a good reputation for helping struggling homeowners. They don't issue loans but they insure them.
How Can I Give My House Back to the Bank? | eHow.com
You can give your house back to the bank through a voluntary process called "deed in lieu of foreclosure." Homeowners who realize they can no longer afford their home often choose this route instead of allowing the bank to foreclose on the property. The bank benefits by saving on the legal fees necessary for a forced foreclosure. With a deed in lieu of foreclosure, you voluntarily transfer all rights to the property to the bank. The bank then cancels the remaining balance on your mortgage, and you walk away with no further responsibility for the home.
Read more: How Can I Give My House Back to the Bank? | eHow.com How Can I Give My House Back to the Bank? | eHow.com
