Like Bebop says, they really want you to keep your house. This is NOT the market to be saddled with a house to sell - the mortgage company knows this. I'm surprised they're not trying to work with you. Have you asked for help? Usually they automatically put you in the Home Modification Loan Program to see if you're eligible.

I cannot imagine they would start foreclosure proceeding over $4K. That would cost them more than that. Good luck.