I deal with this type of situation every day. After 22 years in the business I have found that about 60% of my business is now doing short sales. My loan was with ASC and i was in a similar situation to yours. The problem that I found is that unless you have 20% equity in yout home you cannot re-fi. Additionally, if you are current on your payments the banks will not talk to you about a modification. ASC (which is Wells Fargo) is very unlikely to work with you on a modification. The reality is they can make more money by foreclosing on you than they can by working with you. The whole thing is disgusting. If you need to speak with soeone who truly understands the ins and outs of this marketplace feel free to give me a call at 707-280-6110. No fees or sales pitch involved, just straight forward information.
Best of Luck!
Unfortunately, as you well know, there is no program for you unless you are already a Freddie or Fannie loan.
There is a silver lining and that is that since you have a 7/1 ARM, your interest rate will likely stay the same or go down in this environment. Typically on a 7/1 ARM, the first adjustment could go to the maximum of 5 to 6% above the start rate but it is based on index + margin and the indexes are all low so the ultimate rate should be low as well.
If you would like, I would gladly look at your note and let you know what to expect. My email address is email@example.com and my number is (866) 385-1650