Before the financial and housing melt down, my wife was in law school and would occasionally file bankruptcy for folks pro bono. As one of the steps for filing, she reviewed all of their expenses. When looking over their monthly expenditures the individual would usually say things like "I need HBO and ESPN, it's a necessity. I need the data and texting plan and on my phone, it's a necessity. I need to lease the car from the bank and not drive a clunker or ride the bus, it's a necessity. I need to eat dinner out four times a week and not bring a sack lunch to work." Yes, these things are nice to have, but they are not necessities. In the end, she would play financial advisor to some of the poorest individuals in the city who spend their money on these "necessities."

If your mortgage is under water (i.e. the principal is more than the value of the house), you can't sell your house. And a large percentage of American mortgages are now under water.

Foreclosure is an option. If it's your only option, it sucks, but it is a way to cut costs. Is it expensive in itself, given the damage it does to your credit rating? Well, yes, but that doesn't mean it's not there, or sometimes the best choice. Should you not have ended up in the position where that was the best choice? Well, yes, but if that's where you are, that's where you are.

It's important to separate the ideal fact that you shouldn't be in that position from the practical fact that it is indeed an option.

You can't sell it without a writing a [certified] check for the difference or getting the bank to agree to a short sale. True that people in dire financial straits may not be able to do the former, but the latter is not out of the question.