Foreclosure and Refinanced Loan for Rental

[iceepoli]

We currently have an investment rental property where the original loan was 165K. We recently refinanced, pulled cash out, and got a new loan with a balance of 251K. The market value of the property is around 200K now, so we can't sell it. Because the property has significant negative cash flow, b/w 380-500K/mthly, our accountant has advised that we let the property go into foreclosure and get rid of the property. On the legal side, we want to be sure we understand the rules before proceeding. We heard that banks are more strict on pursuing homeowners with rental homes that have been refinanced. From a legal aspect, what can the lender do if we let these homes go into foreclosure? Are they limited to just the property as collateral or can they seize other assets? Can they issue a deficiency judgment? Will they issue a 1099?