WAMU in distress...loan mod still possible?

[Joel Fraser]

I have been lurking here now for more than a month, and am now ready to decloak and post for H-E-L-P!! Reader's Digest version of our story...both husband and I are employed (still, thankfully) however, I had to agree to a 50% reduction in hours recently to retain my job (with a fairly large sized lawfirm, no less, who is experiencing fairly serious cash-flow problems). Take the hourly cut, or get out, were the choices. I chose the former, rather than the latter, but now am making 50% less, and we can no longer afford the payments on our WAMU ARM/Neg Am. (MAT-12) loan. We are not yet late on our mortgage, but have been borrowing for the last 2 months to make payments for deficit caused by my reduction in hours. Property was purchased in 2004 for $680,000 - 1st $543,000, 2nd HELOC $70,000 - all with WAMU. No PMI (we put 20% down - NIQ, stated income) but house is now worth AT MOST $525,000. House around the corner recently sold for $435,000 after 12+ months on the market (it was a dump though) but other like-kind props. in the neighborhood are listed for @ $500,000 with absolutely NO ACTION. More than a few foreclosures surrounding (San Diego county) and while I am looking for new employment, there is NOTHING but part-time at my current hours available. We are upside down, but still would like to stay in the house, as our kids have moved enough, and we'd like to stay put if we can. To make matters worse, I was the one providing health ins. to our family of , and now with the RIH, we are on COBRA, and paying MORE THAN MY MONTHLY GROSS INCOME for the premiums!! Husband is a diabetic, so we cannot afford to go without insurance. Lousy policy also has $5,000.00 deductible and NO pharmacy coverage. His meds are running close to $2,000 per month, but I digress, as this is not a healthcare reform forum, but a Save Your House forum... After 2 weeks of trying to actually speak to someone in Loss Mitigation at WAMU, I finally reached someone named "Todd" and shared our dilemma. He said because of my drop in income, we probably wouldn't be able to re-fi, and it wouldn't do us any good anyway, as going to a fixed would increase our payment, since we are already in an interest-only mode. He also said that they "most likely" won't be in any hurry to look at our loan mod. package as we aren't yet late - seems ridiculous to me, that we are being punished for being proactive. Here's my question...given the fact that WAMU looks to be in serious trouble, should be sit on our hands (and scramble to continue to make the payments) and wait until October 1st and see how things shake out, or continue to move forward with the Loan Mod. paperwork now? My biggest fear is that WAMU will be bought by B of A, or some other equally repugnant financial institution (they're all about the same though, right?) and it will be even harder to get some relief. Thoughts? Advice? The WAMU guy Todd, was quick to offer a forebearance for a "couple of months" but that is less than a temporary fix, as I have been now interviewing for a couple of months, and have gotten nowhere. A few offers, but for LESS MONEY than I am making now. In a perfect world, we would like to see a reduction in principle, but it looks like from what I'm reading here, that is most likely impossible, except under the new Rescue Plan. (which looks like it's got too many "gotchas" in it too). What to do..................Thanks in advance for advice or input.