This sentiment is quite unfortunate.  I often hear people who are feeling the financial squeeze and emotional toll when faced with foreclosures, that they tell me they're ready to throw the towell and let the lender take the property. 

Their argument becomes one of desperation, stating that they no longer care if their credit gets worse - "after all...how worse can it get?" they say.

So, when you say you've decided to let it go in foreclosure, do you mean you intend to do nothing and just let it go?  Well, consider the following:

If you're defaulting on your mortgage, even if you have two or more loans, I believe (take it with a grain of salt - I don't know how the FICO algorithm will ultimately score this), stopping payments on both will not worsen the effects to your credit score more than the foreclosure will. 

Also, in a foreclosure, any junior liens are typically wiped out but, all lien holders could go after you via deficiency judgments.

These are typically then sold for pennies on the dollar to collection agencies who have it in their business plan to haunt you until they wear you out and collect. I'm not sure how long this can remain outstanding, but I've been told one of the tricks they use to keep it alive indefinitely is to continue selling it, creating a new activity against you for x more years.

If you are able to sell the property, you may have several months in Florida (it may be different in your state), to negotiate a short sale with the bank.

It is ultimately the lender(s) decision to see that the risk of pursuing the foreclosure and trying to sell as a REO (Real Estate Owned or foreclosed property taken back at auction), may be costlier than the decision to accept the lower offer you get in a short sale.

During a short sale, you'd have to negotiate with all lien holders and see how little will they accept. For junior liens, start low (say...5% or 10% of value), and work your way up. After all, something is better than nothing, which is what they'll have to accept if there is a foreclosure.

Either way, negotiating with the bank(s) often reduces (does not eliminate), the chance of being pursued with a deficiency judgment, where the alternative for them will then be to issue a 1099 for the loss, which you in turn would have to report as (phantom) income in your 2008 income tax. In this case, visit the IRS website or talk with your tax advisor on the ramifications of this.

By all means, doing something is much better than doing nothing. Avoiding foreclosure is the name of the game. Don't take my word for it. Visit any of the government websites like IRS, HUD or FHA, even Fannie Mae, Freddy Mac and even your lender's, and notice that they all will indicate to you that foreclosure should be the last stop.

On your way there, you have several options you should explore. Start by talking with your lender(s), (document everything you discuss - even confirm in writing any conversations you have noting time, date, conclusions, etc), and try to refinance, a forebearance or modification.

If there is time, hire an active, professional Realtor (remember - choose wisely and if able, choose one who is also a Certified Distressed Property Expert or CDPE), to list your property and sell it while you explore your other options. Remember, you'd have to price it aggressively, so don't try to price at 2005 prices.

For those considering bankruptcy, obviously choose your attorney wisely.  Find one who practices real estate and bankruptcy law and is familiar with all the ways to help you.  With today's bankruptcy laws, you must qualify to participate.  Typically, if you own property you wish to protect in a bankruptcy, you may have to file a Chapter 13 reorganization.  This may not wipe all your debts, but will help you stop all harassing calls and help get you in a payment plan under the protection of the US bankruptcy laws to allow you to get back on your feet. 

However, this is mostly for those who are able to resume making payments, their refinancing, foreberance or modification options are not available or beneficial and who are able to stay and make payments to the bankruptcy trustee as agreed.  If you miss a payment, typically, this kicks you out, forcing the judge to reevaluate your case and determine if this was just a fluke or if you're in trouble again.  If you miss again, you're basically out of the program and the protection of bankruptcy, which means you'll be back on the auction block fast.  The lender will ask the judge to allow them to pursue the foreclosure and they typically resume with a vengeance.  Again, consult a competent attorney to explore your individual situation and to see if you qualify.

Chapter 7 bankruptcy may also be used to help you fight the judgements or collections, and a competent attorney could guide you in this regard  too.

Your second to last resort if your lender options or bankruptcy don't work for you and selling does not work is to try and turn your deed and keys via deed-in-lieu of foreclosure over to your lender. Learn more about it in the different websites I suggested above, then ask your lender about it. Although this will also be damaging to your credit, it is much less damaging than a foreclosure.

A foreclosure means that you will not be able to buy for at least 5 years based on the new law passed for all FNMA and FreddieMac loans (see more about it HERE). No conforming lender could lend you for that time and then, you'll have to come up with at least 10% down.  Interest rates for you may also not be favorable ever again, if they perceive you as a foreclosure risk rather than one who, in the face trouble, tried everything they could and got the property sold - even if short.

In addition, you will always have to answer "yes" to the question asking if you've ever been in foreclosure. If you say "no", you risk being found out and be charged with fraud for lying in a loan application.  Again, there's a fraud task force in Miami looking to pursue all fraud cases.  I don't know about you, but I don't like the bling-bling or orange suits I may have to wear.

Moreover, your credit will suffer for a long time. This means, higher credit card rates (even if they're low now). When they review your file - and they do this frequently - and find out about your situation, they'll raise your rates.

Also, if you need to lease or buy a car (some think - "I'm keeping my car", and not consider the loss by hurricane, flood, accident or theft), when you want to apply for new credit, when you submit credit for rental of any property and even, many employers check credit during employment checks.  In each of these cases, you will have to suffer the consequences of your foreclosure.

In short, foreclosure is NOT your solution if you can help it.

Get informed, seek counsel, work with a qualified Realtor (remember, not all real estate agents are Realtors - members of the National Association of Realtors and local board like RAMB - who are held to a higher standard by their Code of Ethics, plus not all Realtors are Certified Distressed Property Experts), and stay in touch with your lender(s).  You must do everything you can to avoid foreclosure.