Here is my non-agent answer.
Not knowing how old you are but at the same time being irrelevant. The Real Estate market is not "coming back" We are on our way to a new reality of lower more affordable home prices. What we are witnessing now is the removal of the artificial boost in home values due to years of rampant fraud throughout the housing industry. As lending standards continue to tighten over the next few years from lenders realizing that the next leg down in values is on the way and need to protect their loans, you will see the lifeblood (easy credit) getting squeezed to a trickle.
Rates are just about as low as you can get at under 4 %. Even so, the prices are still inching downward. As those rates start to increase in years to come, you will see the economics of owning the property become less attractive. And for those who say rates will stay low, I know you are out there! But keep in mind that the ten year treasury influences long term MTG rates just as much, if not more than the Feds prime rate. And Treasuries are going to suffer the same fate that Greek bonds are, eventually, not right away but it is brewing.
I think we are on the cusp of a return to normal in housing prices. Where prices would have been without the 25% to 40% fraud induced ramps in values year over year. When we were living in the bubble (or better described as a Ponzi) it feels great! Long live the bubble when you are in it! But try as they may, the Fed cannot reignite a new fake ponzi. Everyone (lenders, Fannie Mae, Freddy, pension funds) are all looking for a way out of the Ponzi that they got caught short handed in. Inflation is running at 8-10 percent not the 2 to 3 % the FED suggests (see Sysco food dist conference call). Real incomes are shrinking in inflation terms.
My advice, talk to attorney first, then a good accountant. Once you have become educated and well versed and know the few adverse affects you may face personally, I would suggest you stop paying the mortgage.
With a good atty, you can plan to have the home rented for the next two to possibly three years while going through the process of getting a modification. If you get a mod, great. Now you will have a 1% +- mtg to pay on. If you don't get a mod, fine also, you have still done the right thing by protecting your future and safeguarding your personal finances. And don't feel bad about this, sometimes things just don't work out, and that's OK!
That why there are provisions in the loan that covers default, the banks understand this is a possibility as well. You are not doing anything sinister or evil. You financial future could be at stake so take wise steps, whatever those may be.
Do the right thing and consider to stop paying. Don't short sale the property unless you get in writing from the bank that there will be no deficiency posted (1099-c) to you.
Good luck my friend.
You non-agent truth teller, Chris