We're in this situation right now. I lost my job in July and still haven't found anything. We were barely scraping by but kind of making it and then dh had to have emergency knee surgery in February and was out of work for 12 weeks. We called the mortgage company as soon as we knew he'd have to get the surgery and tried to work something out w/ them then - but they told us that since we were current at that time, they couldn't help us.
So 7.5 years of solid payment history meant nothing of course. They actually advised us that if we were a few payments behind they'd be more inclined to work something out w/ us. So, we stopped paying because we only had my unemployment for 5 weeks until his short-term disability (which was dismal) started coming in. But we couldn't afford the mortgage then either. So we sent in paperwork to try and do a loan mod showing that at the time we were short on monthly expenses by half a mortgage payment (we are about 115k under (our neighbor has lost 148k) - and yeah we know we messed up). They sent us back a rejection saying that the investment group that owned our loan didn't allow modifications.
I mean really all we really need is interest adjusted - dh says it'll be tight but we could make it on just a mod on interest. So we kind of gave up and started preparing ourselves for the inevitability of moving.
Then a few weeks ago they sent us a letter that we had been approved for a 'temporary' loan modifciation. When dh called them confused about what they were doing - basically they told us that doing this temporary loan mod where they wanted us to pay x amount for 3 months, didn't guarantee that we would get a loan modification in the end. And every mortgage person we know advised us not to throw money at them without a premanent written modification in hand. We don't want to lose our house - we know we did this. Lots of stooooopid decisions and lack of planning for the what-if's got us into this situation.
Right now we're stuck here, but are saving a moving fund, knowing we're going to have to do deposits for the dogs, etc. We have checked and we can rent simliar sized houses in our area for less than half of our mortgage. Of course there's only 2 of us so we don't even want a house this big. But that's where we are. We don't think that a short sale would work, but aren't ruling it out. But in our state, there are protections for homeowners who face foreclosure and not neccessarily for those who choose short sales. Kind of backward, but I guess that's the way it goes.