re: underwater on a real estate loan

I'll echo what Hawkeye said as far as gov help for investors. As far as I know there really isn't any. In the situations that Htown put forth, there is the possibility of a private modification, but this is at the discretion of the lender and might be tough to pull off since it's not losing money.

Igoringa's hypo might work, but it would take some negotiations. Also keep in mind that the terms probably won't be good with a private mod, since the gov isn't giving the lender anything as an incentive. I would recommend talking to a real estate attorney.

Oh, and one other thing about forclosure vs short sales. Based on the research I've done, the initial ding to your credit is basically the same, but doing a SS could mean that you get back into a house sooner. FHA guidleines state that you can qualify for a new loan 3 years after your short sale closes. I believe it's 4-7 for a foreclosure and the down payment requirement is greater. I suspect that Fannie and Freddie will eventually loosen their restrictions as well.

Also, a lender doing a manual underwriting might look at a SS more favorably as it shows that you made some effort to cooperate with your previous lender.

Anyway, sorry to ramble. Hope this helps.