It is a tough question to answer. It all depends on what the terms of the loan mod are, if there is an actual reduction in your balance or are they backloading it… etc….

So you can either loan mod it, short sell it, or you can simply walk away as well. You can also talk to the bank about a deed in lieu of foreclosure which is basically handing them the keys but doing it in a more structured manner then simply letting it go to foreclosure. I also assume there is only 1 loan on the home.

The rate of recidivism on loan mods is quite high. I am not sure a loan mod will give you the security you are seeking. However if it substantially reduces your monthly payment WITHOUT hurting you on the backend (ie – they backload the deferred interest) then maybe that works for you.

Unfortunately without running the numbers it is hard to say. Many people complain about the short sale process and it is a pain in the butt. However most people who do go through and complete it, feel much better after they are out from under that debt load. At least that is my experience. sdr does alot of short sales and he may have advice on that as well.