Good Morning Miked,
Below is a link which will take you to the "Short Sale" section of the forum.
Short Sale Outpost - Loan Modification Forum - Loan Safe
This may help you get an idea of what is in store for you if you decide to go that route. From what I've heard, short sales can be a nightmare. In my area, buyer's realtors have given up on them almost completely. They would rather deal with bank owned properties than waste their time and energy on short sales. From what I've been told, the process is very long and there are no guarantees that the potential buyers will get the home. I've heard of lenders sitting on offers (for several months) with little or no communication while they waited for a better offer to come along. I'm not trying to talk you out of anything, just letting you know what I've seen and heard from the buyers and their agent's perpective.
In the above post, you had mentioned staying in the home for another three to five years. If that is the case, you may want to contact the NACA in hopes that they can help you before your adjustable rate kicks in. Some members here have gotten assistance from them while being current with their payments.
I appreciate that you have been looking at this from every angle (long term), but usually we crawl before we learn to walk. You wrote above that you don't think you would be able to handle a higher mortgage payment, so if I were you, I would try to prevent that from happening first. JMO.
