If you HAVE to sell, 'short sales' are becoming more and more common. What that means is, the lenders will accept less than the amount owed. It used to be that if you had a second mortgage, you couldn't do a short sale but these days you are able to do so (at least in our area). This does affect your credit rating but it's not as bad as a foreclosure. Look for a local agent who is experienced with short sales because it can be complicated as far as paperwork, etc.
If you don't HAVE to sell, sit tight and try not to worry. Real estate always comes back, especially in California.