I own a condo in Michigan which has significantly dropped in value since I bought it in 2002. I now live in California and have had a tenant in the Michigan condo for the past two years. It looks like I am going to lose her shortly and will be faced with paying the mortgage on the condo and my rent here in California which I can't afford to do since I am 72 years old and have been retired for two years. Also, if I were able to sell it I would need to come up with over $40,000 at closing assuming I could even find a buyer. What will be the impact on my credit standing if I just allow the lender to foreclose?

I don't know about an exact point drop in your credit score, but I have heard that at a minimum it will decrease by 100 or more points. It would also make it very difficult for you to purchase a home at a reasonable interest rate anytime in the near future.

Is there any way that you can subsidize someone's rent? For example, if she currently pays 800/mo, you can put it up for rent for 600/mo and you could pay the difference. This would increase the interest in renting the property and you could possibly find a solution to your situation during this lease period. Although you would have to come out o pocket, it would be nothing compared to foreclosing on a home and the potential costs associated with it.

I've heard the lending institutions are working with consumers who are on the verge of defaulting. Although I know you are not at that point, I would definitely proactively reach out to your lender and let them know of your situation. It is much cheaper for them to work with you as opposed to forclosing.

Plus, you are aware that if the bank gets less for the property than what you owe, they will still come after you to make up the difference? Plus potential court costs, etc.