Jean and Jude own a townhome that was purchased for $165,000 on 6/30/2007. Current property values in the area have not substantially recovered to their pre-2008 values. They believe that their current mortgage balance exceeds the townhome's current market value by $30,000.

Their family has grown from 2 to 4 (twins, boy and girl) and as a result they need more living space. The children will be starting school within the next 6 months. They are not pleased with the quality of the current school system. They need more living space and want their children to attend school in a better school district. Jean and Jude have decided to look for a different home. They would like a detached single-family home with at least 3 bedrooms, 2 full baths, a 2-car garage and a acre back yard.

After interviewing several Realtors, Jean and Jude have selected you to find them a new home and discuss the options of either selling or renting their current home.

Jean and Jude have asked for you to provide the following. How would you respond:

1. Explain the advantages and disadvantages of selling or renting our townhouse. Assume that we would have to take an early distribution from our individual 401Ks to make the down payment on a new home.
2. If we stopped making the monthly mortgage and escrow payments, what action(s) would the bank take?
3. Regarding our townhouse, which course of action would you recommend: selling the townhouse, renting the townhouse, or stopping the mortgage and escrow payments?