Faces of loan modification: Kathy Partak, Auburn, Calif.

How well is the government's loan modification working? WalletPop's four-part special report continues with profiles of some of those trying to get help. To read the overview, click here.

Kathy Partak went into loan modification armed with the powerful combination of knowledge and motivation. She had worked in the mortgage business, so she knew her rights and the right vocabulary to use. And she had a step-rate loan that was about to step up dramatically.

Add to that an on-the-job shoulder injury that left her unemployed and Partak figured she was a perfect candidate for modifying the loan on her three-bedroom home in Auburn, Calif.

But Chase Manhattan Bank denied her a modification, Partak said, telling her, "Unemployment is not a permanent hardship."

"Hopefully not!" said Partak, 42. "But it's one of the reasons they allow for on their paperwork of qualification."

Partak is honest about the fact that the family never should have taken out an equity loan to overhaul their backyard. Then again, they never expected property values to plummet. The Northern California home Partak and her husband, Dave, who is on active duty with the California National Guard, bought five years ago for $409,000, was appraised in 2005 for $525,000, is now worth $274,000.

Like many Americans, Partak's life has taken more then one unexpected turn in recent months and that cumulative effect adds to her sense of urgency.

"Several ... things just caught up with us," she said.

First her injury, which she assumed would be temporary, turned into a longer-term problem. Then, her 6-year-old son, Mason, needed extensive dental work, which cost the family more than $1,000 out of pocket.

The Partaks have fallen a month behind on their regular $2,250 mortgage, Kathy Partak said, and two months on their $889 second.

"I can see now ... how really good, honest, hardworking people become homeless," she said. "I can see how one thing leads to another.

Still, Partak is not the sort to give up easily, saying she knows "there will be a silver living" for herself and others in similar situations as the recession begins to lift.

"I'm currently on unemployment, working temp jobs, and even have the possibility of working with a nonprofit that does loan modifications," she said. Talk about irony.

Partak also is not leaving everything to chance. She has hired an attorney to help her negotiate with the bank. The stakes are high because, on Dec. 1, her payments will rise nearly $500 a month.

"Come 12/1/09 we won't be able to make both payments," Partak said. "Something has to happen."