Should I use my 401k to pay off the mortgage?

No, I do not recommend using your 401(k) to payoff your residence. I encourage you to contact the bank and discuss the options they are currently willing to offer to you. If the 1st and 2nd mortgages are with different lending institutions, contact the 2nd mortgage company first and see what solutions they are willing to propose before you contact the lender of the 1st mortgage to notify them of a pending loan modification. Do not liquidate your retirement funds for the purpose of paying off a home that has negative equity! Your mortgage debt can be restructured. Ask the bank to put their recmmmendations in writing, then discuss with your attorney. More than likely, there will be tax consequences for debt forgiveness.

Great advice by dmurphy. If you are struggling to make the payments then definitely try your bank first to modify your loans. Especially in today's market. I'd even check with your existing lender to see if they can possibly refinance your first and lower that payment to help you. There are refinancing programs out there that will allow you to not have equity, not many but it might be possible. If you are wanting to pay it off because you are upside down then I'd have to ask you "are you looking to sell'? What we have to remember is that the value of our home is not important really unless we are ready to move. It's just like when the values were so up and people had tons of equity but because they weren't moving and selling their home it really was irrelevant if your home was worth a million dollars. Also, you have to rethink in this respect as well, it is best to have in the bank what you owe on your home. A free and clear home that gets destroyed by a natural disaster loses it's value except for the land. But with money in the bank you'd still have it if your house got destroyed :). New way of thinking.