Will the bank take back the house?

You are not obligated to pay off your parents' house. Debts do not pass to family members. However, your parents' estate must pay it off. Foreclosing transfers the deed back to the bank/lender. What you are suggesting does not really make sense. They ARE going to require that any deficiency owing is paid from the estate and it will be the responsibility of the executor to pay it.

If there's not enough in their estate to pay their bills, the bank will just take the house. But any money that's in the estate must be used to pay their bills before anything is distributed to their heirs.

the estate takes care of the assets and obligations

the executor should see to it that all the property and assets are appropriately settled before any distribution to heirs

the sale of the residence should have taken care of the rental balance to make it available to sell by the estate

you as heirs and beneficiaries are not responsible, the estate is but if you are executor and have not planned well, you have a problem

They may accept deed in lieu, executor of estate wshould contact them.

best option for the bank is shortsale....best option for your fathers credit is who gives a sh=i_T best option for you is rent...even better is rent - to own...it in good shape

You will have to talk with the mortgage company. You may be able to refi ...

since the owners are deceased, the debt is not your problem, if you can't sell it

You need a VERY good attorney.