All loan forgiveness options have guidelines on who can qualify, and all have credit score implications. But I am sure you have already researched out those options. You need to hire a lawyer to assist with any negotiations with the bank; if you go at it yourself you will emerge battered and bruised; a lawyer will help to soften the punches considerably.

A note that I didn’t see mentioned here, banks have to approve a short sale and a deed-in-lieu of foreclosure. When a house is upside-down in it’s mortgage it is highly unlikely a bank will approve either unless the following occurs (not an exhaustive list): moving out of the area (your golden ticket); milliary related; insolvency; death; divorce; long-term illness; etc…

Before most banks allow a deed-in-lieu, they will require you to attempt to short sale for a minimum duration of time.

I myself am at 240% in my LTV (purchased for 240K, mortgage balance 200K, current home value 83K). I am not an investor, just bought at the wrong time. I have spent over 1 1/2 years cajoling the bank with short-selling and deed-in-lieu, all to no avail. Now my family and I are going to foreclose and move on with our lives.

Are they even doing deeds in lieu anymore?

What a predicament. I guess if it were me I’d make three moves at this time:

1. Track down a Realtor in the old town who specializes in short sales. Most cities now have real estate agents who are experienced with this now and can advise you on whether this would be a reasonable move and what the implications would be.

2. Talk with the lender and see if they can make any accommodation for you. Deed in lieu is one think to ask about; they may have some other strategies.

3. Find a professional property manager and see if he or she can find a renter who will pay enough rent that you can carry the rest of the mortgage without going broke.

IMHO, God does not want you to crash and burn. There’s no moral issue here: mortgage lenders are huge faceless companies that have no compunction about taking advantage of you or, quite frankly, of destroying you and your family for the sake of profit. Take care of yourself and yours, and let Caesar take care of himself.

If your costs are $1,000 to $1,200 per month, even if you could rent it for $800 you are stopping most of the bleeding, perhaps even the point that you can technically afford to keep both houses. Plus then someone else is paying your mortgage off for you.

Perhaps you didn’t employ the best stewardship when you bought the house…everyone was buying, it was a crazy time in the market, people overextended on the promise of increasing values and big payouts in a couple years. But now here we are, faced with the result. Money might get tight. People might have to work more hours or cut back on expenses. It stinks – but it’s life. But just because everyone is doing something (short sales, etc) doesn’t make it right – isn’t that what got us in this real estate mess in the first place? Don’t just do what’s “popular”…do what’s right.

Yes, life will go on regardless of your decision. But don’t go down without a fight… Every time I have a setback – I look at it as GOD doing a work in me. Maybe renting that home at a loss will truly bless the occupant – we don’t know how God moves in these situations. Some things truly are more important than money.

I am almost positive that is only for your primary home (it is under the Mortgage Debt Relief Act of 2007).

@Stew,

I am not sure whether they would or wouldn’t but really what is the harm in asking? There is none. Banks are not in the business of being property owners, they don’t like it and don’t want it. Just telling someone that you MIGHT default may be enough to get some action.