My mom is in a very similar situation as you. The advice she got was to stop making payments for a few months until the mortgage company comes to the table, then talk them into reducing the amount you owe. The savings are worth the credit hit if the mortgage company writes off 1/3 of your principle. There is no 1099 involved since the mortgage company agrees to it, so it is simply a free-to-you reduction in the amount you owe.
If you don't have any other debt and are not planning on buying a new house anyway, what do you need a good credit score for? My spider sense tells me that when all the dust settles from the current financial situation in the US a credit score won't mean jack anyway.
I have had a house on the market for almost 2 years now and only had a couple of bites, neither of which were able to secure a loan. I made my last payment on that house last month based on the advice my mom got, in hopes that my mortgage company will make a deal. I tried calling them to negotiate while my payments were up to date and they said hell no. So I will try again after a couple of months of not paying and see if they will negotiate.
This goes against my grain in a big way. I was taught to always pay my bills on time and fulfill my responsibilities, so stopping the payments hurts a little inside, but knowing my mortgage company falls under the AIG umbrella helps ease the sting some.
I am living in my dream home now and don't plan to ever move again. We have no debt other than our mortgages and aren't planning on financing anything ever again, so...ain't got no use for credit anyway.
Anyway, good luck!!!