ASC Arm Readjustment

[SuzieQ]

Okay, so I am new to this forum and quite frankly more discouraged than ever after reading so many posts about how predatory ASC seems to be.

We have 2 mortgages with ASC, a first that readjusted this month to 8% (217,000) and a second at 9%(57,000). I have had to quit my job due to our child's medical issues. We knew this adjustment would be coming and with our income significantly decreasing, we started checking into all our options early on. We are not behind as of yet.

We met with realtors about selling our home starting last fall, but since we are new construction, and with the appraisal going down this year, we would not even break even. We have talked with several lenders and all say an FHA Secure would be our best bet, but since we have a significant escrow shortage (we could not pay our taxes this past year due to our situation), we would be over the cap in our area by about $13,000 (which we cannot do unless we don't make our current payments here for a few months but by then our credit will be shot).

We got counseling from the HOPE Line who told us to ask for a fixed lower interest rate with an extension of terms from ASC. We started this process in February. We sent all documents and a hardship explaining my child's illness and a work out sheet showing only $230 left after all expenses. They sent us a letter in April (after several calls that I documented) denying us because we were "missing a proof of income from me" (Even though I do not work due to our baby's illness).

So they claimed that we had to start the entire process over, which could take over 90 days again. (all of this is documented)The loan modification seems to be our only hope of keeping our house (which we very much love) but I feel they are just stalling to see if we can make this month's new payment that has gone up another $800. I call every day to check and they say a negotiator has it now).With help from our family, we could probably scrape together the extra money, but is that showing them that we can handle the payment going forward so they will more than likely deny us the modification?

We have worked very hard to keep our credit clean through all of this. My other question is this, we have racked up a lot of credit card debt and have worked out a plan with most of the card companies where we pay a set amount while we get back on our feet. This is totaling about $750 a month (the additional mortgage amount).

Should I charge off the cards for now or make very little (like $5 payments) so I can pay the mortgage? Should I pay the first mortgage and not the smaller second for awhile?

We just need some help in sorting all of this out as in about a week, our payment will be considered 30 days late. Thank you for any and all help!!!