I’ve talked off and on over the years with Lyletta Robinson, whose nom de blog is “The Woodlawn Wonder.” She’s been blogging for years about her experiences as an urban pioneer buying a condo in Woodlawn, a neighborhood still trying to recover from white flight and gangs that took hold decades ago. The neighborhood experienced a brief gentrification wave during the recent housing boom and is now slipping backwards because of foreclosures.

She was corresponding recently with my colleague, Natalie Moore, about possible story ideas and sent her this email:

Well as a matter of fact Natalie, I do have an idea for a story that may not be making the news.

We’ve all heard about how the Home Modification Program may not be helping the people for which it’s intended, well I just received a letter from my lender letting me know that I DIDN’T qualify for the program AND due to my unemployment that the principal and interest that I can pay is unacceptable.

What does this mean?

It means that as of the end of October, my mortgage goes back up to its original payment (I was on a modification plan for $777) of $1,100.

I bring in whopping $1,426 a month on unemployment and whatever I make at the restaurant (usually under $200 a month).

My lender said that they can’t work with me on another loan modification program until I get a job to provide sufficient income.

I have never heard something so ass backwards in my life.

At this point, I stand a very real chance of being foreclosed on.

When you hear about the program, you’re under the impression that it’s set up to help.

You lose your job through no fault of your own and you want to do right and keep your house, so you report your change in situation to your lender.

Huge mistake.

At this point honesty—for me at least—has not been the best policy.

Call me if you’d like to discuss the situation further.

I seriously don’t know what I’m going to do.

Sincerely,

Lyletta Robinson
(The Woodlawn Wonder)

Robinson lost her job at a bank in August 2007. She didn’t find another job until July 2008. She says that period of unemployment caused her a lot of financial hardship. She drained her savings and retirement accounts. In May she got her mortgage temporarily modified down to $770 a month. Then she lost the new job this past August. So she asked for another loan modification under the Obama administration’s Making Home Affordable program.

She says at first her servicer told her the loan would be $467 a month, which she thought was manageable on her unemployment benefits and her sporadic waitressing income. Then, she says they sent a letter telling her she was rejected from the program. They said her home was worth $170,000 and that she’s not upsidedown on her mortgage, so she didn’t qualify for the Making Home Affordable program. (That seems to be incorrect, according to the guidelines of the program, found here.) And her servicer told her she didn’t earn enough money to qualify for a loan modification.

“Here’s how I see it. Automakers can get quickly bailed out, banks can get quickly bailed out, but the average American homeowner has to sit and wait and beg,” Robinson says. “People are just now running out of savings, possibly going through 401(k)s and pensions, and I know I’m not the first person this is happening to.”

The foreclosure crisis has now spread to more middle-class people with fixed-rate mortgages. They’re losing their homes because they’re losing their jobs. But they don’t qualify for a loan modification if they have fewer than nine months’ worth of unemployment benefits left. This has left a lot of people scratching their heads, saying the program isn’t targeting people most in need.

“Modification is a permanent solution, and workouts require a permanent source of income,” says Jerria Donelson, a foreclosure prevention counselor with the Aurora, Illinois-based nonprofit, Joseph Corporation. “Unemployment can’t be considered a permanent source of income.”

Donelson says if people come see her as soon as they lose their jobs, she’s able to help. But often they don’t do that.

“Most people are at the point of where they’ve just about used up their unemployment, so that group of people it doesn’t help,” she says.

Treasury Department spokeswoman Meg Reilly says the government is working on ways to help more unemployed borrowers.

Luckily for Robinson, there’s a happy ending to her story. She “had a friend who could help.” She declines to be more specific, but says that friend contacted her loan servicer and voila, yesterday she received paperwork for a forbearance agreement. It “significantly reduces” her payment until May of next year, by which time she hopes to have another job so that she can work out a more permanent arrangement with her bank.

But Robinson’s very aware of how lucky she was.

“I’m going to sign it and get it in the mail ASAP,” she says. “What about people who don’t have that option? I can’t believe there’s nothing for people who lose their jobs through no fault of their own. I can’t believe there’s such a glaring hole in this administration’s policy that they forget about the rest of us.”