PHH (Cendant) 1st, Beneficial 2nd, any chances?

[Joel Fraser]

The story begins with a relocation due to the volatility with the aerospace industry. Anyhow...After we sold a house and moved we purchased our home in April 2006. The housing prices in the area we were looking were high compared to our previous home. The other odd thing was that although our new location (Georgia Coast) had significantly higher home prices, the FHA views the area as low cost with lower FHA Limits. Go Figure. We finally find a home, and were approved through PHH Mortgage for a loan. We could not go FHA because the FHA limit at the time was too low. House purchase at 270K with NO PMI (Rate Increase). We are at 7.75%, We actually purchased the house with good equity, and were concerned about loan terms, but fell for the "just get in the house and refinance later". Seemed fair enough, after all we were buying before the "housing bubble" popped. House payments high, but manageable. Fast Forward to Dec 2006....Still had significant debt due to pay cuts and such in the past, as well as repairs to the home we now affectionately refer to as the "money pit". We answered a solicitation from Beneficial for a 2nd Mortgage (equity loan). 54K or so at 12.24%. I Know, crazy, but we were going to re-finance in 6 months or so after we had the 12 month seasoning with our first loan. You know the drill "You can't look at the term or the interest rate because you will probably keep this less than a year". As the Real Estate martket started to slow, we really couldn't do any better rate wise, and now it is to the point of can't refinance due to the LTV ratios. I know I should not have counted on the market staying strong, and refinancing into a better loan, but things had been so strong for so long I figured we may as well take advantage of the opportunity. The other thing I did not count on was the cost of Gas, Food, Clothing, Electricity, etc. to just about double since we bought our home. With the clarity of hindsight, I sure would have done things different. I have taken from 401K, sold vehicles, and bought necessities on credit to make ends meet, and have finally come to the conclusion that we need more drastic changes. With yet another Escrow shortage, our payment is 200.00 higher since closing. With payments close to 3k, and the fact that I can not refinance I need to come up with something. We can rent a comparable house for less than half of our payment. I don't want to lose or walk away from my home, but I am out of ideas. When I found this website and looked at the loan mods, they seemed to make sense, but it looks as though the 2nd Mortgage holders seldom perform mods. Maybe a short sale to the 2nd mortgage holder? I'm pretty certain we could sell and cover the 1st fairly easily... The new rescue bill doesn't seem like it will help much either. Thanks in advance to all who take the time to read this. I'm sure not proud of this situation, but need to find a way out...