Any real estate advice would be welcome. Kind of a confusing situtation?

Wen my husband turned 18 his mother pressured him into co signing a loan for a house.
Saying he just had to help pay for a few years and when we was done with college shed take over.
. He always paid his half of the mortgage and household bills. When he was deployed he'd send extra money home for the mortgage and his mom would spend it on furniture, upgrading her bmw etc. My husband and I are now married and we live together in an apartment. When we were engaged his mom agreed that since we could not afford to live there mortgage,tax, insurance is $2,600 a month. Not to mention other expenses like heat food car insurance student loans etc.

That we would find renters for the other two rooms. We found great ones but she vetod them. She found her own, his older brother & a women from church. 5 months later we got a letter from the mortgage company, wells Fargo that they were going to start foreclosure as the mortgage was 5months behind. She hadn't paid a penny since he moved out! She also didn't have any money in savings to pay it. So the mortgage company said they could look at all our information and possibly do a remodification on the loan, to make monthly payments more affordable. We just got news that they denied it and so want the $11,500 that is due. The house is underwater. Valued at $170 k with loans for $225. Husband and I want buy a home for us soon so we cant start a family. So we don't want to destroy our credit. Any advice on how to proceed.

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