In my case, "walk away from a mortgage" means taking advantage of the real option that is priced into my mortgage contract...that is...if I stop paying on the loan, then the bank can take possession of the house. Luckily I can still afford the payments...at least so far. This means that I dont think I qualify for any assistance and I dont think the bank will even entertain my questions until I show them I mean business by missing several payments.

I suppose my problem is that if I stay in the house and continue to pay, then I will end up significantly overpaying for this asset. It just doesnt feel right. At some point it doesnt make good financial sense either. I have not spent the time to figure out where that cuttoff point is. I think you could figure it out by making a lot of assumptions about what credit I will need over some time horizon, such as any cars, or homes for the next 10 years?. And making an assumption about how much higher my rate will be for such loans with a worse credit score. If this additional cost of credit is less than the amount that I will end up overpaying for the current home then maybe it makes sense to walk.

The challenge is that your credit score is used for so many things now (insurance rates, jobs, etc.) that the calculation will require a lot of assumptions. At least I think it will.

So far I have decided to continue paying the loan mostly because I am too chicken to walk because of the uncertainty of the calculation I mention above.

What a complicated question. There are no set answers here. Things to consider:

- bad credit will affect you for years to come. How's the rest of your credit? walking away will affect your ability to get another mortgage. The next mortgage company will want to know what happened and the honest answer will not be appreciated.

- how much are you upside down? If you think the price of your house can recover in the next 5 years, I'd say, stick it out. If you've got an expensive house and you'll likely never recover, tough decision for you.

- giving the house back/selling it at a loss (short sale) is easier on the credit score that a total walkaway.

- if you decide to walk away, make sure you've got auto loans in place, etc., because they will be reluctant to lend to you also.

I have the same question. My mortgage is about 117% of the value of the house. There are a couple articles in the WSJ today about this...

http://online.wsj.com/article/SB125903489722661849.html#mod=todays_us_nonsub_page_one

http://online.wsj.com/article/SB125902556993561567.html

Very interested in any answers...or at least suggestions on how to quantify the cost of decrease in credit score.

I saw the same articles that Jackson88 is referring to--1 in 4 borrowers underwater. I'm wondering what exactly you mean by "walking away from a mortgage." Maybe you've lost your job and can no longer afford your home? Before you walk away there are so many resources and options available right now. No promises, but it's worth a look. I'd suggest you look into those before abandoning your home--and your credit history.

•Consult with the National Foundation for Credit Counseling, (nfcc.org). A specialist there will help you figure out your mortgage situation. And they actually return phone calls if you leave a message! (They are a national nonprofit.)

•Consider a short sale. Lenders are still trying to figure out how to report SS on credit history. Your score won't be dinged as much (80-100 points). It's not an easy process and you have to find someone willing to buy your house before you can do the SS, but it's better than foreclosure.

•Look into refinancing and government sponsored homeowner help programs. The NFCC is probably the place to start with working through the gov't red tape to figure out how to make this work for you.

Ah, remember the good old days when your home was supposed to increase in value around 6% each year...