First off I would like to thank you for your service to this country and I do wish you the very best in all aspects of your life. I do believe Ann did provide one viable option for you to consider. If you are able to rent your home to a qualified tenant and that rental income cn fully cover the expenses on your home, and allows you to move to more economical housing, then this could possibly be something to consider.
In addition to discussing this with your Realtor and a real estate attorney you may also wish to consult an accountant/CPA to see what impact if any this may have on your financial situation.
I have been working on short sales for the past 5 years and I can attest to the fact that while there are some "horror stories" of what has gone wrong or how long the process takes, the banks have made major improvements to their process and short sales are being approved at a substantially faster rate. While it is easy to blame the banks exclusively for delays and complications in the process, I can share with you that part of the problem has also been that the banks are not provided with the documentation requesting in the manner that is needed. When a bank receives an incomplete applicatoin, of course there will be delays and complications. It is only when the banks, sellers and agents work together efficiently that the short sales can be processed.
As for whether you would qualify for HAFA assistance, that is something you can find out directly from your lender. Depending on the investor that owns your mortgage, you may qualify for relocation assistance, as well as having the lender waive the deficiency judgement. In times past, only home owners that were delinquent on their mortgages were able to sell their homes as short sales, that is no longer the case, but again, it depends on your lender and/or the investor. You do have options such as Ann's suggestion, or a refinance, a mortgage modification. You are best served to speak with your lender to see what options are available to you in your particular situation.
Good luck with this, and I do hope that you are able to find the best solution that will work for you.
RE/MAX Advance Realty