I agree with the home owner, this has gotten off topic. This forum is designed to help home owners with good answers to their questions, and instead has turned into a topic of other tangential topics. John Walin's remarks attacked the home owner, and are not in place, in what I think is a self-policing and civilized forumn. I think they were angry remarks where the anger should be directed elsewhere. Peter T's remarks, from Baltimore, seemed to attack his own fellow agents! I think at the end of the day, we can all act professional, and cool headed, and give the best and most logical advise that is possible.
So, getting back to the QUESTION being asked, and not getting off topic, I say, Dog, Sir, you are in a pickle. You have not defaulted on either mortgage, and I find that commendable. You don't wish to do a short sale and ruin your credit, and I applaud you for that. You have not done a strategic default, and I applaud you for that as well. You are honoring your obligations to your lender and simply came here seeking honest advise of what is a difficult personal financial situation. So in the end, after you have already read 75 posts as answers to your question and as alot of tangential conversation as well, I think this topic is a "hot button" topic for all the right reasons: alot of home owners have negative equity these days, and can't sell and don't wish to default.
My answer and advise, and the advise of others as well here, is the same; rent it out and break-even, and wait until things improve and positive equity comes back. I firmly believe that real estate is tied to banking and the banking has shown itself to move in 8 to 12 year cycles of "bust" and "boom". I will not repeat my earlier answer.
So assume inflation is 3% per year, and get a CMA or better yet and appraisal, of what is today's selling price. Assume 3% growth for 5 years. So, in 5 years, you will recover today's sale price plus 15%. If inflation is higher, at say 5%, it will improve things. But I don't think the market will stay flat. I think jobs are rebounding, and the economy is recovering. I think in 5 to 12 years from now we will see stabilization of the market. We have to have a "correction" or a crash in order to have a boom. So this is the corretion phase. It will last from 2007-2012 in my opinion. We then will follow a "trend upward" phase, which I believe,based on past history, is 2012-2019.
The other option you may have not considered, and I think it's a worthwhile idea, is the biweekly mortgage program. Here's a link: http://www.toweradmin.com/.
This will put you a method of paying down the principal faster. Statistics show that less than 3% of home owners have the discipline to get into paying one extra principal only payment per year, and if you are not on a program, it's very hard to do that. It will help you reduce your principal faster and faster. So, you can't control when the market comes back to normal, and I can't control that either, and none of us on this forumn can either. I can give my honest opinion, but, in reality, it's just an opinion and nothing else. So the only thing which is indeed in your own control, is not what the market does but what YOU do. So, if you can't control price appreciation, you can indeed control how fast you pay down the principal and thus, in effect, recoup your equity.
So I take my earlier advise: of renting out the home on a rent-to-own basis, coupled with a faster pay down of the principal due to a biweekly mortgage program. This way, the income to pay down the mortgage is not form your own pocket and to make it really count, you enter into a biweekly program to get the principal reduced faster. This way, whether your rent out the home for 2 years, or 5 years, between inflation taking place, and paying down the principal faster, you are regaining your lost equity , which is lost due to market conditions. Here's another link to a biweekly provider: http://www.aaafinancial.com/
I think this topic has been exhausted to death and I think that the home owner got all the answers he's probably looking for.