Loan Modification without an unemployment forbearance.

We have been trying for a loan modification with Wachovia for several months now. We are NOT in default and have excellent credit and no credit card dept or personal loans. I lost my job 15 months ago and unemployment in our area is at 18%. We have been using our savings for supplemental income to keep our mortgage current. We need a loan modification solely based on my spouses income but they keep trying to force us into their (UP) program (Unemployment forbearance). After reading the document for the program, this is a scam!. By taking the UP it causes an immediate hit to your credit rating of 50 - 100 points even if you are paying as agreed. I know this because they forced us into the program even after we declined (both verbally and in writing) it in-spite of the fact that I made the full mortgage payment!( I had to contact the credit bureaus with proof to have it reversed.) At the end of the forbearance , you have a balloon payment made up of the difference of the scheduled payment and the forbearance payment. In our case that would be well over 12,000 for 6 month period. If you cannot pay the balloon payment, foreclosure proceedings begin. That simply does not make since to me. If you are already struggling to make your payments how do you make a balloon payment? How do we apply for and get a HAMP without lying about my unemployment? We do still qualify for a HAMP solely on my spouses income but they won't process it.
The only jobs available to me pay less than unemployment, yet Wachovia says until I'm off of unemployment they won't even consider us for the HAMP. Are we going to be forced into default to qualify?