To walk away or not???

[Roselynn Lewis]

I got approached by a friend with the following; I would like to know your thoughts on a possible course of action for my friend:

I have a three bedroom townhouse which I bought at the height of the market in 2006. I bought it for 400k. It is now worth 170k in terms of market comps. I am paying 2300 a month.

Room rentals are about $600 USD per room in my area. I have a basement which is semi-finished.

Thoughts? My thought is that she adds a fourth room in the basement and rents out the entire house and just holds it for the long run. She is considering a move to another state for other purposes.

The friend is thinking of just walking away and letting the bank foreclose on her. She already got the mortgage adjusted to this new lower rate.