Home Equity Loans Arizona

My husband and I fell short on our mortgage payments back in September of 08 due to decrease in income. we made several attempts to work with the bank (countrywide) at an early stage to work with us in reducing our interest rate, (which was 7.5% fixed rate), and make our payment much more affordable. they gave us a long run for about 6 months, although we had provided all the documents they had requested. our credit was going downhill from more than 700 pts each to about 400pts. We got advice from a realtor to “short sell” the house at its current value (200k) and prevent further damages or foreclosure. We got an offer on the home right away and were excited get out and start anew, but the bank refused to take the deal. We did not know what next to do. Country Wide as bought by Bank of America in the midst of all of this. We then started to send payments we could afford, hoping that they would see that we are making efforts. The bank returned the payments because it was not the full amount plus the late charges. We just could not afford it! Anyhow, we refused to abandon our home and walk away like most people advised. We just kept the house on the market at the value houses in the area were going for, knowing that it might not be approved by the bank, and just waited for whatever was to come next. We took the house off the market and resubmitted the paperwork when Obama introduced the new help for homeowners’ bill. After waiting for another 4 months or so, we just got a loan modification approval: the original loan amount is 349,900K. Bank of America is taking this amount plus the interest fees and back payments bringing the total new amount to 381,650.68 at an interest rate of 5.5% fixed rate for 40 years. Our new mortgage payment is going to be 2,697.54 as compared to 3,175.00 that we had to pay originally. Does this sound like a deal? My concern is the house is now worth 200k we bought it for 349,900k and paid on it for a year before we started having problems. Subtracting the back payments from the original amount leaves approx 318k (or even less for the whole year we made payments). Instead they are asking us to pay the back payments plus the original loan amount of 349900k, which totals 381,650.68. I’m confused; are we paying the back payment twice? We really want the loan modification, but the new amount just seem horrendous and I’m confused. Please help me understand