The news is blanketed with stories of all of the foreclosed properties out there. Although it is true that many homes are “upside down”, unless you are having trouble paying your mortgage, there is no reason to panic. Real Estate, like any market, is cyclical. There is a trough and a crest, if you are financially able to ride out the market, you will be back on top. At that time, you should recognize the top and take advantage and sell. Many people are not willing to part with their home even when the market would benefit them to do so.

Well, what do you do now if you are having trouble paying the mortgage? Do not go to one of those “loan modification” companies, they are most likely a scam. There are options however. If you have at least 20% equity (at the value stated on your note) you can refinance and take advantage of the rates and lower your monthly payments.
If you are looking to unload the property, your options are either a short sale (where you negotiate with your lender on a sale price that is less than what you owe on the note).

You can also create a “cash for keys” deal with your lender where you simply give up ownership and the bank takes your property in exchange for writing off your note. This may have tax consequences because of the forgiveness of a debt.

Finally, you can stop paying on your loan and the bank will ultimately foreclose. This is an option for those who have no where else to go and need the extra time (usually 9 months) to save money so they can relocate. However, this is the most damaging to your credit.

My advise is to consult an attorney to review your options prior to taking any drastic measures such as stopping payments.