The big question is what happens to the 600k that they were able to get removed?! There is something now, as an alternative to doing a short sale, its called a "short pay refinance". What that is, is kinda like a short sale same process but its a refinance, so you get to stay in the home. This program is only for those homeowners that HAVE NOT been late on their mortgage, showing that responsibility does pay off. You would usually refinance FHA only on these. It all depends on if you want to stay in the house or not. If you dont want to stay in your home, then a short sale would be best. You just want to be careful, because you dont want to go through with some company that will promise you things and it not happen, or it does happen and they(the bank) come back to you later trying to sue you for the remainding balance. Whatever you do, just make sure EVERYTHING is disclosed, so that if a situation where you have to go to court behind them comes up, you covered yourself!