Stuck w/ bad load product from equity share failure/scam

[Joel Fraser]

So we've been in our house for almost a year now and are still making the payments on-time. The story starts a year ago when we unfortunately got into an equity share agreement w/ GMAC mortgage in Orange County. $1800/mo payments for 3 bed-3bath house for 2 years...no down payment, just had to qualify for load w/ partner company (affiliate w/ GMAC mortage in Mission Viejo). Turns out the partner inflated our income (stated-income loan due to our excellent credit) to minimize their down-payment. Partner made payments for 2 months then was late 1 month, then stopped paying...long story short is the house is 100% ours, we have the deed, partner has released all claims to house in writing, and only our name is recorded on all loans/docs/etc. Problem is we now have been making a $3600/mo payment on a 10-year 7% interest-only loan through IndyMac (yeah, my luck). Terms of loan state refinance before 3 years is a 6 month interest penalty. Have talked to IndyMac Federal recently about modification, and they've said they can't do anything for us unless we stop making payments. Both my wife and I have excellent credit and good savings from a previous home sale, but she is currently staying home with our 2-year old instead of working so our income is app. $100k year and the mortgage is currently $558K. Can't qualify by ourselves to refinance (plus penalty) unless we get stated income option again I would think...have options for family members to co-sign for boost in income, but we've also got the problem of lost home value...house sold for $620K, current comparables are $520K. Any suggestions or should we find daycare and get our income up enough to refinance into a better product (+ get a second to cover loss of home value)? Thanks in advance and I'm sorry if this is rehashing several other threads as I've just joined and trying to read everyone elses similar/better/worse situations.