[Professor Shays]

From the information provided it looks like it is safe to say the property is underwater (figuratively speaking). This lack of equity puts you in a challenging position. The choices in my view are fairly clear cut, and to some degree require that you look into your own crystal ball and try to figure out what the market will do in both the short term and the long term. I constantly preach that probably the best approach to take is by being business like and creating a two column page. On the left you would have factors that suggest keep making payments. On the right, factors that suggest accept the consequences of foreclosure. Please do that on your own (yeah I know columns don't work when posting in this forum but you can create two lists).

I'll help with the column on the right. The difference between the properties monthly fair rental value and that portions of your mortgage payment that involve interest and taxes should be viewed as a negative. An obvious additional negative is how long it is going to take your home to get up to where it increases in value so that you can sell it and not take a loss.

Bottom line is that with two loans that look like they are non-recourse in nature (see previous postings that discuss California Code of Civil Procedure Section 580b), you are very lucky when compared to a lot of people who post on this forum.

Take care,

Daniel