We took an early withdrawal from my wife's 401k. I've read that if the withdrawal was to prevent foreclosure that I might not have to pay the penalty. Is this true?

While certain hardships may allow you to make a withdrawal that would normally not be allowed, it doesn’t exempt you from the 10% penalty on early withdrawal.  

And specifically, using the money to avoid foreclosure is not an exception to the early-distribution penalty.  See the list of exceptions:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions">https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions</a>