<prompt> Human: My friend bought a house in south Florida in 2005 at the peak of the housing bubble for 380,000. She and her husband were new to the country and had no credit history, so they took out an ARM to pay for the house. After the market crash, her house is now valued at 120k. She tried to talk to her bank about the homeowners assistance program, but she was told that her loan was not HUD and she was ineligible for loan modification. They worked out a deal where she pays on 280k of the loan to keep her monthly payments lower, and if she sells the home, shell have to pay the 100k remaining.What options does she have? She likes the house, but is now considering letting the bank foreclose and buying a different foreclosed house with cash although the deals are getting hard to find.EditUpdate: Thanks for your comments, everyone! I am of the mindset that if you take out a mortgage, you should pay it off. However, during the housing bubble there were a lot of banks that took advantage of people that are not very financially versed. Her mortgage company is PHH mortgage. They increased her monthly payments and she didnt know, so she was underpaying them for a few months. Then she received a foreclosure proceedings notice a week ago, along with two returned payment checks. When I called on her behalf, I was given the run-around about the loan modification process. I have advised her to try again to contact the attorney handling the foreclosure process, and hopefully she can get the matter resolved.  <response>: How much does she value her credit?Lets talk about worst case:Foreclosure in a recourse state FLThey sueThey winThey collect the 280k fees worst caseBest case:ForeclosureNo sueNo winThey collect nothing.Sounds like the expected outcome is better than paying it off, ignoring the credit hitBest to read up on strategies for avoiding getting sued before you do this.Edit: I would ignore the people saying that theres a moral obligation to pay off a mortgage debt. Banks dont have morals, I already bailed them out with my tax dollars, and foreclosures keep the economy going round and round. 