It seems unlikely that a bank would require you to pay off your mortgage if you are still making payments (I am not even sure that they can). A bank would buy itself a large headache in a market that is so depressed, and typically loses about 20% in the operating costs (realtors, holding costs, legal fees, etc.) workout process. If you walk away, certainly the amount of debt forgiven would be considered income, and they would send you a 1099 for that “income” ($10,000 in this example).

Also, the second mortgage / equity lines of credit are usually the ones that have a clause regarding curing a large fall in the price of the collateral (and I think you might have to just make up the difference, rather than pay it all off). I don’t think that first mortgages work that way.