startingfromthestart, I'm so sorry that you are having to consider staying away from family during the holidays. In my family (I have 3 siblings) we've all hit a rough patch financially at one time or another, and have been up front about not being able to get people gifts during the planning phase for the holidays. No one holds it against the other, and NEVER would we have let it prevent the rest of us from buying gifts for the children (ok, only one of my sibs has kids, but I'm quite certain that if we did, and one of couldn't buy gifts, the rest of us would still buy for that person's children).
Of course, you know your husband's family best, but before you cancel Christmas, are you absolutely sure that if you just took the adults aside ahead of time (call them, e-mail them, whatever), and explained that you're dealing with a foreclosure etc, and won't be able to buy any gifts this year, that they wouldn't be understanding? You don't have to suggest that they alter their gift giving routine, just let them know where you stand. I wonder if at least some of them wouldn't be understanding? Maybe I'm naive but I have trouble imagining loving aunts and uncles being Scroogish - surely at least they will want your kids to have a good Christmas? Depending on their response you can decide whether to arrive after the gifts have been opened, or if you get lots of reassurance you can hope that the kids will get at least some gifts.
One other idea is that maybe you could do something both inexpensive and creative - what about making a big Christmas pinata filled with candy for the kids? They aren't that hard to make - a lightweight box that's prescored to make it break more easily, tissue paper, etc. For the ultimate irony decorate it like a giant present ;-)
Or what my sister in law has done in the past when money was tight - fill a basket with inexpensive items - candles, candy, fun socks, nice soap, etc - pass it around once or a couple of times with each person choosing one thing. Kids version could include bubbles, noisemakers, costume jewellery, silly putty - the kind of thing people put in loot bags.