Flagstar isn't helping me

Started with a search on Lendingtree to see what we needed to be approved to buy the house we were renting when owner's put it up for sale. That house would not appraise for loan (according to Flagstar loan officer) so we began search for house since were were pre-approved by lender. Our FHA loan is with Flagstar Bank FSB, and it is over 2 years in arrears. We worked with Home Ownership Center of Greater Cincinnati, through Hope Now program, and a volunteer attorney through legal aid, for over a year and half attempting to get a loan modification. No response from lender. Flagstar took our house to sheriff sale almost a year ago, June 23, 2009,. stating we had not made any payments at all, when we had, and a predatory lending complaint that I filed through Ohio Attorney General's Office got some assistance from OAG (for a very short period) and they contacted Flagstar and got them to cancel/postpone the sheriff sale. Flagstar then offered us a forbearance plan that would not lower the payment, and we did not accept the forbearance plan they offered due to unemployment lay-offs and current lower income.
Husband has been laid off (carpenter) 8 months of 2009 and working 3 months of 2010 and is currently waiting word if work is available soon or if he is laid off again until more work is available. (laid off for one month & just returned to work last week & hopefully work will be available & continue.) Also filed complaint with Office of Thrift Supervision in Washington, D.C. and lender denies predatory lending charges. Examples of predatory issues in the set up of loan: Flagstar approved as an FHA loan within 2 years of bankruptcy. Added Ameridream down payment 'gift' back into loan and paid it back to sellers at closing, & the added on amount made payment higher. Flagstar sent a letter, forwarded through change of address, two weeks after closing stating we were denied loan and reasons listed why denied, included bankruptcy and debt to income ratio, etc... We have never seen or received copy of appraisal, were told at closing it was being sent to us but have never gotten. Recently faxed in & re-requested copy of appraisal and it still has not been sent to us....
Flagstar approved us for 20,000 more on another property, but we were outbid and found this house as a for sale by owner and we were re-approved for this house at 132,500. (appraised at 133,000) we were told house was 'stick built', but it is actually an 'up-graded' modular home.... Comparable house right next door sold last summer (not foreclosure) for 50,000 less than we were told our house appraised at for loan purposes... Flagstar included 800/month overtime income to approve loan, based on what my husband had earned the year before. When overtime was not available, actually short weeks in winter, got behind on payment. (Can't afford high payment without overtime income.) Closing date--Dec. 14, 2008.
Now waiting for when lender takes house back to sheriff sale. Legal aid says once we get a case number to bring loan paperwork to them for review of the predatory issues within the set up of the loan. Lender recently sent us paperwork (again) to send in our current income info. For possible loan modification. We have sent this same information repeatedly since we were first months behind on payment. Still no loan modification offer made. Also approved (twice) for up to $5000 from state of Ohio for help with loan modification, but since no offer was made, approval has expired twice.
We have done and followed every step of the 'help' programs no help from the Flagstar. We cannot afford to file chapter 13 because the repayment plan is too highon 40 hour paychecks (took $2/hr. pay cut to get back to work, and he then laid off again also) We are more than 2 years behind on the payments. We cannot lose our home. We have a 12 yr. old and 15 yr. old that already lost their home (of 5 years) to greedy Ameriquest & later received a measly $700 settlement from them over the predatory issues in the loan on the house they foreclosed on/ took away when we got behind after layoffs back then. (Chapter 7 bankruptcy, April 2006) But if we are not correct in the predatory set up of our loan, why have they not taken it back to sheriff sale - especially this long after canceling sheriff sale almost a year ago? Please advise.