Default and then rent. Seriously. If your house is worth far less than what you owe, you're basically renting it from the bank and you have to do all of the repairs and replace the appliances and all of that ownership shit.
Talk to an attorney, though, before you pull the trigger on it.
(H/T)
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In California, Arizona, or Nevada there's not much talking to do. Unless they can prove that you knowingly defrauded the bank, there's nothing the bank can do, thanks to Depression-era laws that say that taking your home is all the recourse the bank has against you if you default. Florida isn't "officially" a non-recourse state but juries in Florida so rarely rule in favor of lenders that it is a de-facto non-recourse state. It's no surprise that those four states are the leaders in people walking away from homes they could not afford but that they got talked into sinking money into by all the talking heads saying "hey, even if you think you can't afford the rates in 3 years when the interest rates reset, you can still sell the house then for 20% more than you paid for it and have some cash left over!" It was a lie, the bank knew when they loaned you the money that you couldn't pay when the rates reset but gambled that housing prices would keep going up and they could make a profit by repo'ing and selling it to the next sucker, they lost their gamble, well, sounds like their problem not yours, eh?
So f*** the banks, indeed. But as you say, do consult a lawyer if you're not sure whether you're in a non-recourse state or not. It'd really suck to have your income garnished into eternity to pay back the bank for the money they lost between what they loaned you and what they managed to sell the house for.
- Badtux the Real Estate Penguin
Good advice from BadTux, to which I'd just add that if you've reached the point in your loan where you're paying off the principal, then you have something else to consider. Walking away from a mortgage in that case means walking away from whatever money is there, which is yours.
Stating the obvious, I suppose, but it's what I do.
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