Does a guarantor on a mortgage automatically carry over when the terms of the loan a

does a guarantor on a mortgage automatically carry over when the terms of the loan a...my husband bought our house in 1995 from his father's girlfriend. both his dad and his (now) stepmother are listed as guarantors on the original mortgage. we niavely presumed that we had a 30 year mortgage and that the terms wouldn't change. the bank that gave my husband the mortgage was the same bank that my father-in law used and gave my husband a lousy interest rate at the time 9.75%. we had no idea how bad that was. the house was purchased for 72,000 and had several major things wrong with it (septic tank caved in within a year of purchase, leaky roof and basement, the well was not up to code,etc.). i realize it's our own fault for letting his dad presure us into this in the first place and for putting up with it as long as we have.
the bank has changed hands twice in the last few years and we were called to the bank to sign papers regarding our mortgage twice( once in 2003 and again in 2006). again we were very trusting and just believed the loan officer when she said it was no big deal that they just needed some signatures. we later found out the hard way that the terms of the promissory note included a balloon payment after 3 years of more than the house is worth. we have lousy credit and therefore finding someone other than our original bank to refinance a house for more than it's worth is looking impossible. my father-in law used the 72,000 from the sale of this house as a down payment on his house that he currently lives in and therefore had alot to gain from the sale of this house when he sold it, the bank was obviously not looking out for our interests as there was never an inspection done on the property. we are now facing forclosure and the bank is telling my father-in law that he'll be responsible for the remainder of the balance on the note. i had called the bank and been told that my husband's name was the only name on the mortgage. when we mentioned that my father- in law was on the original mortgage the representative from the bank told me that his name did not appear on the "refinance" from 2003. when my husband's father went back to the original loan officer he was told that because he was a guarantor he must pay the balance on the loan. at this point i just want out of the house it has been a money pit and i am ready to let the bank have it. my husband is afraid of upsetting his father and is getting a guilt trip from his dad about the whole thing. we have been living without running water in the house for months because of damage from area floods and i can't get a licensed plumber to go near it because the well is illegal and has been since 1953.
is his dad responsible? the only paragraph i could find regarding revocation of guaranty states:" ...any renewal, extension or increase in the interest rate of any such obligation, whether made before or after revocation, shall constitute an obligation contracted for or incured before revocation. obligation contracted for or incurrred before revocation shall also include credit extended after pursuant to commiments made before revocation." help!!!