Your situation is complicated somewhat by the failure of the original mortgage company and the botched hand-off of your account by the original to the successor mortgage company. I will not address this issue, and will assume you either resolved it on your own or retained counsel to do so.
You do not mention the current market value of your property. Go to Zillow.com to learn the prices for comparable properties in your area. However, take Zillow's home value figures for what they are -- a computer-generated estimate that is blind to nuance and incapable of keeping up with fast-moving markets.
Let us assume for the sake of argument that the market value of your property is less than whatever balance the present mortgage company thinks it is. To learn more about each of these options I am about to discuss below, I encourage you to start with the Bills.com resource I Can't Afford My Home, What Should I Do?
You have several options if you either cannot afford your mortgage payments or wish to sell a house that has a market value less than the balance of the mortgage. You can do a short sale, deed in lieu of foreclosure, or walk away from the property and allow foreclosure.
A short sale is where the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. In a deed in lieu of foreclosure, the property owner surrenders the house to the lender voluntarily in exchange for the lender canceling the loan. You should pursue all available alternatives to foreclosure. To learn more about these two options, see Home Affordable Foreclosure Alternatives Program.
Foreclosure is the legal process through which a lender (most typically a mortgage lender) claims an asset from the consumer borrower who has defaulted on their mortgage payments. Because foreclosure is expensive and usually results in a poor return, lenders do not like foreclosure any more than homeowners do. Accordingly, learn more about the aforementioned Home Affordable Foreclosure Alternatives (HAFA) program, which is a federal program that offers financial incentives and guidelines to lenders and homeowners to avoid foreclosure.
You mentioned you have friends with a U.S. Department of Veterans Affairs (VA) loan who would love to buy your property. I do not see your friends as an immediate help to you if the market value of the property is less than the balance of your mortgage. The VA requires that all borrowers get an appraisal of the property before purchase, and it is unlikely that the VA will allow the borrowers to pay more than the market value of the property no matter how much in love with the property the borrowers are.
Instead, the bank servicing the VA loan will advise the borrowers to stand back and wait either for the property to be priced at the market value, or to wait for your property to go into short sale or foreclosure, after which the borrowers will buy the property at its current market value.
I hope this information helps you Find. Learn & Save.