Legal Question in Real Estate Law in Arizona

Home purchase in 2005 in Phoenix, I have a large 1st mortgage and a smaller 2nd mortgage and am now behind on both. I had worked out a modification with the larger lender in March 2008 but when papers were to be signed the mortgage company advised the Deeds were apparently recorded wrong (backwards - large loan 2nd and smaller loan in 1st position) so they expired the modification. It is now 16 months later and every time I try to follow up - all they will tell me is "the file is in legal status". I have not heard from the bank holding the smaller 2nd and credit report shows it "charged off". My hands are tied in that I cannot do anything with the property in regards to short sale or deal with the loans as the past due amounts are excessive. In addition, property is now worth about 60% of purchase price.

Went to Freddie Mac event and lender who holds larger note said "can't help you regarding any modifications under the Obama plan." As I was leaving, he said consider filing a claim against title company (there was a lender policy at time of home purchase).

Do I have any recourse for a title insurance claim or do you have any suggestions on what my next step should be.

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