Have you had an experienced agent communicate with the bank on your behalf? Banks are not in the business of carrying property, and going to foreclosure would likely cost them nearly half of the 89k your home would sell for. Did they raise your payment because you missed a payment, or was it a scheduled adjustment?
Banks will work with you if you have the following:
- Proof of hardship (job loss, mortgage adjustment, illness, etc..)
- in (or threatening) default
- lack of other assets (investments, savings etc, with the exception of retirement accounts)
- Other items and agent can help you through
To answer your question, yes, you would eventually be held responsible for the balance. It is called a deficiency judgment, and banks will almost always pursue this on a foreclosure. However, in a Short Sale the deficiency can often be negotiated as forgiven.
My only concern in your case would be if the bank is considering foreclosure the better option because the loss and the value is, in itself, so upside down. I would highly recommend speaking with an experienced distress property agent in your area.