As Chris stated, a short sale may be an option...
But that too has its issues. You may want to consider the tax consequences as well. In some, but not all cases, the IRS will waive the taxes on the "forgiven" mortgage amount. But the Mortgage Debt Forgiveness will sunset at the end of the year. http://www.irs.gov/newsroom/article/0,,id=254930,00.html
My understanding is it comes down to assets and the financial situation, and if the lender thinks they can recover the loss this way they may attempt it.
Chris great answer!!
It also bears mentioning that there is a way (although seldom used) that a lender can obtain a deficiency judgement after a foreclosure. Foreclosure by advertisement is the most popular type of foreclosure by far, but if the banks chooses to use a judicial foreclosure, it is my understanding that they can still obtain a deficiency judgement after the foreclosure has completed. Just something to be aware of.
Coldwell Banker Burnet
licensed MN Broker
Where this changes is for 2nd mortgages and multiple liens. They do have a legal right to pursue a homeowner through a judgement.
I have pasted a link to my blog that talks about this topic more in depth. In my opinion those with multiple mortgages & HELOC's are the best candidates for short sales. If you would like to speak with me directly just contact me directly on Trulia!