We purchased our home 4 years ago for $114,000. We owe $112,000, monthly payments are $900 (taxes & insurance included) at 6%. The home is currently worth $30,000 - $40,000 at best. We live in Georgia. Both our names are on the loan. I was laid off from work last year and was out of work for 6 months. I fell behind on payments but have now been employed for a year. Me and my girlfriend separated in Nov of last year and I moved out the property and haven't been back.

We did get back together several months later. But have moved into her home, that she just inherited from her grandmother in Feb. 2012. Her home is paid for, city appraises it at $60,000 (was $120,000 3 years ago). My monthly income is $2,800. She receives $600 from her Trust Fund monthly.

Our credit scores were in the 700's. But since we haven't made any payments on the house in over a year, it's dropped down to 540's. We tried to secure a home equity loan (using her property) with all the big banks to catch up on the mortgage but have been denied due to low credit score.

We have no desire to live there any more. But would like to use it as a rental property, either private or section 8. We realize when we look at the numbers saving the property is a horrible "business" decision, but would like to leave the property to our kids (10 year old & 5 year old).

BOA told us the foreclosure date is Aug 7th. But they still continue to call and try to get us to do a loan mod. We turn them down because we don't live there and have a second home. I can't imagine they would offer us a deal since we refuse to live there. I don't have any ultity bills for the property to show BOA for a loan mod. Are they willing to even negotiate with landlords?

If I do walk, is there any way to cushion the blow to our credit score. Lenders won't touch us for 3 years with a foreclosure. We'd love to buy our dream home or maybe some rental property using her equity in her home.