WASHINGTON - Towana Gooch, a single mom who lives with her 10-year old daughter, was on the verge of losing her town house in suburban Maryland after her mortgage lender kicked her out of a government loan modification program. The problem, she says she was notified, was a 7-cent error.

Later, the lender told her the tiny error wasn't actually the issue, that her low income disqualified her from the program. She called the bank trying to get to the bottom of it all, but she got no answers and feared there was nothing to head off foreclosure, scheduled Friday.

After an inquiry by The Associated Press, the bank, America's Servicing Co., a division of Wells Fargo & Co., finally returned her call this week to apologize for the 7-cent error and say the foreclosure sale had been put on hold for now.

Though her story is striking, Gooch is far from alone in her problems with the Obama administration's loan modification program, which provides federal subsidies to encourage lenders to renegotiate rather than foreclose on certain borrowers. Seven months in, many qualified applicants are being rejected, often through bank errors, with no avenue of appeal. Until this month, lenders didn't even have to tell them why.

"If the servicer messes up, even by accident, there is no meaningful way to complain, no real appeals process, no viable ombudsman to consider," said Kevin Stein, associate director of the California Reinvestment Coalition in San

Francisco. "Most importantly, there are no consequences to the banks for failure to do what they have promised to do."

Meanwhile, foreclosures continue to rise with each month's report of new job layoffs and each new wave of adjustable-rate mortgages resetting to higher payments.

Foreclosure filings are on a pace to hit about 3.5 million this year, up from more than 2.3 million last year, according to a Thursday report by RealtyTrac, which compiles data for most U.S. counties.

Gooch, who lost her job as a recruiter earlier this year, said she had been thrilled last month when the bank notified her that her monthly payment would be cut in half, to $938. Gooch agreed to the payment and even logged on to the White House Web site to post a public comment personally thanking President Barack Obama.

"I was so confident in this that I didn't make a plan B or C," she said in a telephone interview from her town home in Upper Marlboro, Md.

But America's Serving Co. later notified Gooch that she no longer qualified for the program because her first automatic withdrawal payment should have been $938.07, not simply $938.

Government officials can't say how many people have been turned down because of a typo, lost fax or an oversight by a poorly trained bank employee. But the Treasury Department acknowledges that far too many applicants have wrongly been rejected.

As of last month, the government had provided some $1 million to banks in investor subsidies and incentive payments through its Home Affordable Modification Program, according to the Government Accountability Office. Obama initiated the $50 billion effort in March to encourage lenders to renegotiate rather than foreclose on borrowers who meet certain criteria, such as having mortgage payments that exceed 31 percent of their monthly gross income.