Help - denied modification

my husband and i bought our home in 2006, just before the values fell. we were fine with that though, our daughter was starting kindergarten, it was our first house and we're in it for the long haul anyway. mortgage process was awful to begin with, at the very last minute (extension already filed) they came back with pmi that would have resulted in almost $4k a month for a $318k home. we had to quickly go with another mortgage broker and i think it took less than 5 days to have our horrible 80/20 subprimes in place. payments were still high, but $3k a month with a promise that in 6 months, we would refinance. needless to say, that didn't happen. housing market dropped and there was no way to save any money for a better loan with a downpayment. anyway, tried modification with original mortgage company, that was ongoing for at least 6 months, but then they sold to another company and we were told we had to start all over. at that point though, the new company was already sending us notices of default and foreclosure dates were being set. we had no choice but to take out a 401k loan to pay the $10k to keep our home. just after, submitted info to the new company for modification - went absolutely no where. finally, this past oct, got them to start the trial period. we are at a disadvantage though becuase, even though they also hold our second loan, we just miss the 31% front end and they will not add in the second that would give us relief. got the letter 2 days ago that we don't qualify. on 4/8, we'll get the formal no and a notice from them that we owe $12k. my biggest problem is that i want to keep our home, we are not deadbeats trying to milk the system. one loan is at 9.25%, the other at 11%, my credit is trashed and to think all i want to do is pay a reasonable in the $2200 range for a monthly mortgage. we can afford it, but not the $3k. we have paid over $120k to them already in the past 4 years for our modest $318k home and now they are telling us we should do a pre-forclosure sale. how does that keep a roof over our head, our daughter in the school district we wanted her in for all of school and us with our beloved (like children) pets? renting is not an option for us becuase of 2 dogs, someone in the process has suggested we consider finding homes for them - just not fair. meanwhile, we'll do what we can with no relief and possibly lose our home anyway. i have had the same job for 11 years now, never collected any sort of any aid, neither has my husband, we are just hard working willing to pay people that will not get help here in the end i guess? meanwhile, the government loses all the tax $$ they could have from us because we have almost $30k in interest deductions paid to these horrible people - guess i could be glad for the tax break, but would rather just have a reasonable payment for sure! the only reason they decided to consider a mod was the obama plan + ma attorney general was able to extend a court ruling against the prior company to these guys. in oct, i was going to be late on the payment, contacted them for that reason, but the guy was very anxious to get me on the trial plan, 1st pmt due nov. 1st. i did not make the original oct payment, so that was added to what we owe them + they gave me a low, low trial pmt. he also said that my 2nd with them would factor in, which was and is current, but the difference each month between my orig first and the trail pmt + fees have been racking up. since they didn't add in the 2nd and we just missed the 31% and now what? i could tell by my last call with them that they really want us to have to sell or foreclose, they had an appraiser come months ago and they valued higher than the 1st loan, but now with plans to compensate these companies for foregiving 2nd loans or whatever that is being formally announced on april 8th (same date they will send me the formal no too by the way) i think they are being incentivized by obama now in the wrong direction, wasn't this all to keep us in our homes??????