I will keep this short and hope it helps others in similar situations.
My wife and I had our income reduced drastically, had a child, and the value of our house declined about 50%. We have a first with Wells and had a HELOC (2nd) with Citi. The house is worth about $400k and we owed $200k on the second and over $600k on the first. We tried for all sorts of modifications while remaining current but nothing was working. We stopped paying and decided it was better to walk away if we could not work something out.
I continued to send my settlement offer to the settlement department which is completely separate from the collections department in my understanding.
I was told by numerous reliable sources outside of Citi that if we went past 6-months late, our loan would be sold to collections and that collections people are harder to deal with so just before it went 6-months late we made one payment. After fighting with Citi's collection people for the entire time and continuously being told that they would not settle and this would be with me forever, I got a call from a real person in the settlement department who had my recent settlement offer in front of her and wanted to talk. I had to send in all of my current financial info again. After reviewing it, she called back we reached a settlement agreement for approximately (just under) 10% of the balance of the loan. I received her letter, had our attorney review it to be sure there was no future liability for the deficiency and wired the money. I was completely nervous that something would go wrong, but sure enough, they received it and I received full reconveyance of the deed. I received a 1099c for the full balance of the loan minus the settlement. It is reported on my credit report as paid in full for less than full balance.