How to cope with 2nd house, banks unresponsive

hi all - thanks so much for this instructive and supportive community.

there have been several views of this post, but no responses. i'll try to create a short version of the story:
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the short story:

we have a 2nd house that we are having difficulty selling, and can not find renters while it is for sale. income has dropped a lot, savings is now gone, and we are getting desperate. 2nd house is with bofa and they have been completely unresponsive so far even though all we are asking for is a forbearance while the house is for sale.

also trying to work with indymac on the house we live in now, thinking we could hang on longer that way, but they are also unresponsive---all they told me after 3+ months is that i don't qualify for hamp, which i had already discussed with them.

don't want to ruin 10+ years of fantastic credit, but have no money, thus no choice. i am asking for advice on which course of action will best preserve our credit, as we have to refi our current house before 2014 or risk losing it as well.
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the long story:

we live in california. in 2006, our house was worth 800k (we owed 440k on it to bofa). we had a fantastic opportunity, so we leveraged the equity to buy 10 acres adjacent to a state park and built our dream house, using a construction and bridge loan from indymac. the plan was to then sell our old house and shove the equity proceeds into the new one, leaving us with a similar payment.

by late 2007, the new house was complete, but the credit markets were completely frozen and real estate in our area had ceased completely. we had a very difficult time financing the new house at all, and ended up staying with indymac in two mortgages, the first a 7/1 arm (interest only) and the second an adjustable heloc (for which the minimum payment is interest only) for a total of 800k, total payments about $3800/mo. we rented out the old house for $2200/mo and continued to pay the $2800/mo mortgage on it, plus taxes and insurance.

well, the renters grew pot in the closets, and when we finally kicked them out it cost us several thousand from savings to clean it up. we put the house on the market, but conditions had gotten even worse. the house was empty and on the market for 8 months and burned up the rest of our savings account.

we rented the house again this spring and summer (for only $1800/mo). it has been on the market again since the renter left in late august, now down to $475k, but no one is really interested. we tried advertising it for rent as well, but no one wants to rent a house that is for sale.

we have also had a reduction in income during this time due to a job switch and a lack of available contracts. my salaried income has dropped a total of about 16%, and my wife's contracting income is gone completely, cutting our total income between 35 and 40% over what it was in 2006.

i have been in contact with both bofa and indymac since july about loan mods, forbearances, or anything else that might help us survive with minimal credit damage. bofa promised to get back to us in 2 weeks. they said this week (almost 2 months after paperwork submission) that our documents had finally been assigned to an auditor and we could expect results sometime before thanksgiving. indymac just responded after 3 months, saying that they can do nothing for us because we are current on our loans. i call them twice a week but get nowhere, and even had one bofa rep say to me "we are not in the business of protecting your credit rating". (no, friend, but how about protecting your investment?)

if the old house were gone we could probably make it on my salary, but at this point we are at the end of our rope. we have no savings left, and as of right now we are choosing which bills to pay. our plan at this point is to simply stop paying on the old house and hope that it sells within the next 2 months. it is devastating to watch this happen, as we got out of debt completely 11 years ago and have a credit rating in the high 700s with no late payments on record, but we are resigned to it.

my goal at this point is to minimize the hit to our credit, as we will have to refinance the new house before 2014. it would also be nice to get a good night's sleep, which i have not had since this started. any advice on our situation would be very helpful.

thanks all

jm