this is not "Legal Advice" However I do work for an attorney and Im a Legal Assistant/Realtor.
A couple of things to consider:
1: Have you tried to modify your loan? Your loan will not qualify for the HAMP program but may qualify for an "IN House" modification.
Depending on who your lender/investor is the may be happy to modify your home and reduce the interest rate and possibly the principal balance depending on the situation.
2: A short sale would be your next best bet if you do not qualify for a modification. There are all kinds of investors/ home buyers who would be happy to buy from you at the current market value, of course depending on the condition of the home.
3: A foreclosure or giving the home back to lender will be the worst scenario on your credit. Also, with the 2nd loan the lender may be able to go after you in a collection situation, forcing you into bankruptcy or paying the loan amount.
You may have alternatives. Doing a loan mod will be the least damaging to your credit.
I did a loan mod on a first and second as well as settled about 5 credit cards for a client. It is less than a year later and his credit score is 640... Way better than a foreclosure or bankruptcy..
Best of luck. Be proactice. the lenders do modify loans but for the most part what I have seen is homeowners submitting incomplete paper work. Or the financials are way out of reality.
Volo law Group Legal Realty
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