As many have said, calling your lender is the first step. They will have an application process for a loan modication. They will need your last couple pay stubs, last 2 months bank statements, a hardship letter describing what occurred that you were no longer able to make your mortgage papers. The application itself is usually a short budget sheet filled out by you to show your houshold income and household debts on a monthly basis. Your request will eventually be assigned to a Loss Mitigator. Be sure and get that persons name so your agent and the closing agent is talking directly to the person deciding on your short sale, if the loan modification doesn't work.
The sooner you contact the lender and start the process, the better. You may be able to save your home if your current income would enable you to pay a modified loan payment. Even if a short sale is the option, the early work can speed the short sale along, since you'll have done your part and be waiting on an offer, then a Broker Price Opinion ordered by the lender to set a market value for your home.
Depending on the terms of the short sale, the bank may go after you to collect the difference between the original loan amount and the short sale net. You'll want to have your attorney review the closing documents. Roberto and Associates does a wonderful job as closing agents on Short Sales.