I recently covered the topic of "Strategic Default" in this post that will provide you with some of the realities you will face if you just decide to walk away:
One portion of this post bears repeating for all who are facing a "distressed property" decision:
"If you are truly considering a â€œdistressed exitâ€ from your home forget about contacting a Real Estate Agent at this time â€“ speak directly with a CPA/RE Tax Lawyer, they are the consummate experts regarding these matters and the only place you should be getting your â€œexit strategyâ€ that a Real Estate Agent may be able to help you execute."
Fail to contact a CPA/RE Lawyer and chances are you will not come out this process unscathed.
CA is a non-recourse state; however, refinancing removes this protection. Again, speak directly with a CPA and Tax Lawyer about your situation!