You would either work out some sort of loan modification to get them re-performing, get a deed in lieu that will get you the property without foreclosing, or foreclose the person. 

They work great if both parties perform, but are hard to enforce if one party breaches.We've had them work out, but only because there was a lot of mutual trust.

When I would go to our treated lumber supplier (Great Southern) to pick up a load, I routinely left with only half of what my PO stated because they were completely out of stock.

It may work out, but what happens if the stock market goes down and there's a margin call?  

Just happens to work out when personal questions come up. 

The number seem to work out to a palatable cash flow of 300-400/month with this refi and lowering our payments, after accounting for capex/repairs and not including property management. 

Should things get worse, Fannie mae will be forced to offer work out programs like HARP.  

If you can work out a solid deal!

The only way to take the "easy" rout in real estate is to take a passive investing approach, by putting your money into other peoples deals. 

I’ve seen people form long term partnerships that did NOT work out well, so it is nice in RE that most deals are relatively short term and therefore you can reevaluate the expectations each time, and make adjustments as needed since life changes too.