Your mortgage obligation does not end if the HOA steps in on the special assessment.
If you are upside down on your property, foreclosure is a likely track. And, just like the HOA, your lender is not going to be motivated to try and help you out by negotiating smaller payments. That is not the way the world works these days. Lenders, HOAs and everybody else wants the money NOW.
Whether this presents a "way out" or not would depend on lots of other factors. Hire a lawyer to discuss those options with you. Online, we can't offer legal advice on Avvo per Community Guidelines.
The unit would be returned to you after satisfaction of the debt, although there may be a provision for you to provide several month's security on future fees due the association. I do not expect the mortgage company will step in to pay since the property is not at risk of loss, possession not impacting title. That does not leave you without needing to evaluate where you want to go from here. If you are upside down on the property, is it worth continuing the mortgage payments. There are too many considerations to cover outside a consultation. For example, have you inquired about a short sale or deed in lieu of foreclosure, do you have other debt, should bankruptcy be considered (even if you have filed in the past), . . .
The scope of this space does not afford an opportunity to assess the situation and advise you. I recommend you assemble for legal consultation: (1) your income information for June 2012 through the present, including wages and unemployment during that period; (2) all your bills (copies neatly assembled, back pages included); (3) last four years’ tax returns; (4) a credit report (use www.annualcreditreport.com to obtain free report if not requested in last year); and (5) other information that may apply, such as copies of lawsuits. Call at your earliest convenience to afford the most opportunity in which to be advised about your best course. You are not required to use an attorney in your area.
I do not recommend filing bankruptcy on your own. There are too many complex issues. I have seen several posts on this site for debtors who filed on their own and are seeking counsel concerning complications. Most of them will have a hard time finding an attorney to get involved to unwind the mess without the attorney charging several times what would originally have been paid.
The scope of this space does not afford an opportunity to adequately advise you. The response provided is intended to be informative, but not final. You are advised to arrange a consultation at which all facts and documents can be explored and terms for representation agreed. An attorney-client relationship must be formally established.
I agree, and keep in mind, the ownership of the unit along with the mortgage obligation stays with you throughout this process. The HOA has possession rights only. Depending on your financial position, and intent, this situation might force you into foreclosure or even bankruptcy. I suggest you see an attorney asap. Good Luck.