For you, without knowing your personal situation, it is hard to advise you, but the fact that your landlords are talking to you about it is huge. Tell them you WANT to work with them, and in exchange, you want them to be honest and fair to you. You want to know when the bank schedules a trustee sale.
Typically, tenants lose their deposits, since the landlords are generally in financial distress and have long ago used that money toward the mortgage. So, ask them about that - and in exchange, ask them to take an equal amount off your rent to ensure you get the benefit of that money. Try to coordinate it with them so it doesn't create an additional hardship for them. For everything you ask, offer something. It will show that you really "get" where they're at and that you sympathize.
Having said all of this, I want you to feel free to call me and discuss in more detail - 703-669-3142. Remember any advise I give is NOT legal advice but suggestions based on what I see on the market.
Previous posters are right about the option for cash for keys, possibility of maintaining tenancy after the bank owns the property, etc. Also, some banks are simply not doing foreclosures at this point. During the presentation with Bank of America yesterday, the VP said they stopped doing foreclosures in the fall - that is both Countrywide and Bank of America (2 HUGE lenders); and that they have people still in homes that haven't paid in a year. So, you see, the process can take a long time.
Also - to answer the inevitable question - should you keep paying your rent? I say yes, with the possible exception that you can deduct your deposit amount. This is because you owe it. It's that simple. Most landlords in this situation have drained their savings trying to keep the mortgage payments made. Even if they stop making mortgage payments at this time, all they are doing is "licking their wounds" and paying down credit cards and replenishing their savings - something they will desperately need if they do lose the home to foreclosure, as they will NOT easily get credit from anyone for a while.
Again, your landlords are in distress, and their reluctance to share the situation with you is NORMAL, and reasonable. Now that the lines of communication are open, work to keep them open and to help each other get through this time by making fair and reasonable efforts to assist each other while still protecting your own interests.
At the time the trustee sale happens, that's when I'd plan to get out. True, you may continue to live there for awhile and you do have tenant rights. The bank can offer you "cash for keys" - its not thousands of dollars, mind you, I have hard anything from $50 to $500. If you opt not to take them up on that, they can do an eviction against you, and while it will take time, they will win, it is their property at that point.
It takes a while to do but not forever. That is why a short sale is sometimes the only option for people who can no longer make their payments; maybe she got laid off or something else happened so is falling behind on payments. Why don't you you talk to them again and ask them if they have received a notice of foreclosure etc. In either case it sounds like your are going to have to move soon so you might want to start looking for something and be ready before th foreclosure. Best thing to do is talk to them and the write a letter to them as followup. How much longer is left on your lease?
My lease had expired on February 09, and I opted on month to month basically because I was planning on buying my own place at the later part of the year...this issue is however now forcing me to start looking ASAP.
I am not sure what my landlords plans are as far as this property is concerned but if they are in a financial distress this investment property is probably the least of their worries. I definitely don't want to lose my deposit which is not a small chunk but about couple of grand. I will talk with them on the deposit matter.
I don't know how long it takes for properties to show in there but this morning I searched on RealtyTrac to see if my condo is listed but found nothing yet.