What-a-Year,
This sounds like a forebearance and not a loan modification. Banks are not apt to writedowns. I saw an article that came out on BankRate.com just a day or two ago irt Short Refinances. You certainly have your hands full and need some assistance. What is the interest rate on your loan(s)? If it is above market rate (or even at it) you can see if you can qualify for a loan modification. A lower interest rate generally means a lower payment, whereas a forebearance generally increases your payment to make up for what's in arrears. With regards to having the balance reduced, or forgiven, the only real way you'll see that happen most likely is in the case of a short sale. Otherwise, everyone with a mortgage would be calling their lender for instant equity. I think it's a great idea also, but from the bank's perspective this would be bad business. I don't mean to discourage you, but those are the facts. Here is a link to the article I was referring to, in case you'd like to read over it.
Best of luck,
Tom
http://ca.biz.yahoo.com/brn/080117/24211.html?.v=1 