Struggling with refi, mod, options, credit, ugh

[chicamarie]

I have seen a version of my story at least once on here, but here 'goes:

First the question: we have an almost completed construction loan wrapped up with our home loan. Both my and husband's work (general contractor) dried up significantly in 2008 after we committed to a larger than we could afford monthly payment - see details below. When the c.loan term is completed along with the project we will probably have about $120,000 in equity but about $100,000 in cc debt due to loss of work and changes in the project (necessary, not crazy design ideas). We are an unattractive candidate for refi due to the employment issue, but we could afford a slightly lower mortgage and consolidated cc debt payment (equity loan?) if we could get one/both. But that will not be apparent unless I am able to show some of the work on our house as my husband's work income. Yikes. Should we pursue the refi with every bank possible until we find one? Are we S.O.L. with our level of cc debt? I feel like the snake eating its tail.

Backstory: We were blessed with a no-doc set of loans when we bought the house in 2006. Good neighborhood, unlikely to decline in value, fixer to us, not much to look at. No-doc loans are seemingly a thing of the past.

Went to US Bank, our bank of choice for everything else, to look at refinancing, home equity loan, whatever we could get, back at the end of 2007. They said we had too high debt to income (barely anything at the time, seriously), but the guy put us in touch with his BIL who was working for a loan company. This guy was streamlining us for a construction loan from Indymac. The loan was UNBELIEVABLE - no mortgage payments for a year, etc. No wonder they went under. We were days away from signing, had already had our architects draft a $4500 set of plans, racked up a $2000 engineering bill, and had progressed as if everything would be dandy. Indymac choked, we were parcelled out to a few different banks, ended up at Homestreet Bank. No complaints about them, yet, I guess.

Well, obviously the loan terms were based on reality this time, more than we could justify at the time but we thought we could do it. My husband was still doing ok at work and I was still doing ok at my job. PLUS, we had committed ourselves to paying for plans and engineering and the ball was already rolling.

Fast forward to today: My husband has had one real project since July. He basically had to spend all his time working on the house (which he had planned to do a little of anyway) since we couldn't pay for subs. My work has dried up, teaching gigs cancelled, you know the drill. We racked up the shocking credit card debt to finish the project and pay our household expenses. Our mortgage would be manageable without the cc debt, but there it is. We just missed our first cc payment, and don't know how we're going to pay the mortgage, among other things.

We haven't missed any other cc payments yet but it's imminent. I am reluctant to treat it cavalierly, however, as I realize we were the ones responsible for the debt, not some outside forces at work.

We have yet to miss a mortgage payment, but our construction loan (wrapped up with the home loan) will dry up as the project is finished this month. We have succesfully used this money as if it were income, as husband was really doing all the work, so I am going to work on our taxes as if this were the case and make our income more along the lines of past years. I'm not sure if this will help or hurt the situation, but he has steady work ahead of him as he is not tied to large and therefore disappearing projects.

I don't want to sell the house. It is bloood sweat and tears at this point. Feel free to say it, because we say it too sometimes, but if you have any advice I'd love to hear it.

Thanks,
Christy

[SillyWorld]

You could file for Bankrupcy, and be able to clear CC debt, wait 7 years and start over