Dogfish said it well of course. Coming from the Mortgage Banking world, which I have gladly exited BTW, my best advice is that your parents have unfortunately lost the right to make their own decisions regarding how and where they will live. The sooner they realize this and start making true sacrifices that will hurt but not kill them, the sooner they can start rebuilding.

Foreclosure/BK are not the end of the world. You can rally back and be just fine after paying a big price for 2-3 years but now is the time to buckle down and realize the situation they are in. Even for 50+ yr olds its time to grow up, dump the CATS, accept the reality and start to rebuild.