[LHarveyMadman]

There's no magic number with regard to surplus or deficit. Generally speaking, though, a very large deficit or surplus will probably lead to a denial of modification. A $500 deficit is pretty high, since you have a large loan balance, a modification with a cut in interest rate to 3% might actually overcome this deficit. Did you crunch the numbers to see what your monthly payments would be with the 3% rate?

Give the analysts a break at B of A. They're overworked and underpaid pawns of the the system, dealing with tens of thousands of desperate homeowners each with their own unique stories. My personal experience with them, having dealt with dozens of analysts over the course of about 6 months, was almost always positive, but I had to accept the fact that I would have to restate my case over and over again with each new person who got involved in my case. My advice is to be persistent but polite, and eventually you'll get results.