Walk away. That is the plan b you signed on to when you signed the mortgage. You said that if you could not make the payments that you would give them the house back.
This is why mortgages used to require 20% down (and what we did when we purchased our farm). It was irresponsible for lenders to give 100% or even 125% loans because when someone owes less than the property is worth, they are not incentivized to walk away. And if they do, the bank does fine when they sell the place.
They were asking the borrowers to just give back the homes with these ridiculous LTV loans. They signed the same papers you did. Give the house back and let them deal with their irresponsible loan practice. They bought themself a house.
Note, this is not possible in all states.
Note, too, that when you do this, your credit rating takes a tremendous hit.
You have to debate with yourself and your family the pros and cons of this approach.
Just be careful out there.
CA....
We were childless when we bought the house and could afford it while cutting back on other things. Then I got a raise and it was comfortable. Then we had a child and started sinking $1,000 per month into childcare/preschool and each subsequent raise has been cancelled out by increasing payroll deductions (first the payroll tax hike and then Obamacare inflating our medical insurance). In August we will be getting most of that $1,000 back as our child enters Kindergarten. It is kind of a moot point now as long as we both keep our jobs between now and August then we can finally start saving some money.
If the bank auctions the property and gets less than you owe, you still owe the difference, even though you no longer have the house.
A better scenario is to put the house on the market. If it won't fetch enough to pay off the loan, then try to convince the mortgage holder that a short sale is in their best interest.