Is it possible to refinance your 1st mortgage if your combined 1st and 2nd mortgage exceed your home value?

I bought my home in the fall of 2005 for $ 285000 with a 80/20 loan. The 80 is interest only for 5 years and the 20 is fixed. My home was valued over $ 300000 at the time so after being there 6 months I refinanced the 2nd to included my personal debt, so I could write off the interest while paying everything down. The loan is at $ 308000 currently, but now the house is only valued at $ 236000 (making it worse my neighbor has the same house and quick saled it for $ 207000 last month). I have 2 years before the 1st mortgage will add principal at a variable rate. The bank said the payment could go up $ 200 to $ 800, not to exceed 10% per year. They also said they won’t refiance the 1st because the combined loans exceed the value. I have excellent credit and what to keep it that way. I have never missed a payment, but with a yearly increase in my mortgage at those rates I will go broke. What can I do to fix it before it’s too late?

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