I don't even know where to start, I guess first, Robyn has stated it has been on the market, so she knows what the Fair Market Value is, compared to the amount owed to the bank and all the other usual fees involved in the sale of a home and that she is facing a short sale situation. As far as the deed in lieu, that is the WORST Advice, and it will ruin your credit, as it is foreclosure and the bank will probably report it as such. You just handed over the keys and said this is your problem, try that with your car when you decide you don't want it anymore, just drop it back off to the dealer or the bank, and see what the bank says,guess what, REPO. Besides the fact that if there is more then 1 mortgage it won't even take place, do you think the 2 is just going to say OK we won't get anything and we will release you from your responsibility. You will still take a huge hit on your credit with a deed in lieu, just the same as foreclosure and anybody who tells you different HAS NO CLUE and shouldn't be giving out advice. The bank, if possible, WILL NOT let you off the hook from deficiencies with a deed in lieu, same as in a foreclosure, and you WILL be held responsible if it is, plus the 1099 you receive from the bank will be much higher with the deed in lieu or foreclosure, compared to a short sale. Also your credit may say "paid in full" with a short sale, as it is all part of the negotiation, as well as the protection from deficiency judgments. The unsecured note that people speak of, usually comes from the seconds that are HELOC's, as they aren't truly seconds and are really revolving credit, so it can follow you, as the bank really gave you the credit and you really only used the house as collateral, but even if there is no collateral left, you still have a credit line and owe the money, same as with a credit card and the banks know this. On a true second that the lender will be wiped out on, they settle for a small amount now, rather then nothing later. Will they ask for a note, probably. Will you be wise to agree, no, as they are just trying to get more from you, but can you blame them?
Lastly, and this should be the first thing you do before you decide anything, speak with a lawyer and a CPA, and I don't mean the guy who does your taxes at the front of Walmart, make sure they both are truly informed on all of these topics. Good Luck and don't believe everything you read.