M.S.
C.
We did the same we moved out to Riverside County for the bigger houses early 2006. Our house has lost about 40% too. I too am a SAHM of 4 small boys.
I have to agree with Kristen though. As long as you can make the payments you shouldn't default on the mortgage as it will ultimately ruin your credit and you will be left with nothing. I know it's hard right now but the loss is only on paper as long as you don't loose the house and the situation is eventually going to get better. We tried to refinance as well and we were told we need to default on our mortgage first!! How stupid is that? And by the way if somebody suggests that to you: it's illegal in California.
There is an effort on part of the banks to help once you are actually threatened by foreclosure. If you have a loan with Countrywide as we do: they don't want to help at all.
Good Luck to you and your family and hang in there.