The reason for the erosion is thin bermuda in that shady part of the lawn. Bermuda will never fill in there. You might try a contrasting ground cover like Asiatic jasmine or monkey grass. Both are slow growers with monkey grass holding the record for slow spreading, but will eventually look fine.

Yup, way way way too much shade for Bermuda--Pick something else for that spot.

That was my fear... too much shade. Will I need to create some sort of bed and fill with groundcover or should I just border the wall? How hard is it to keep groundcover out of the bermuda or vice versa?

This will give the grass a chance to grow in this area as the water will not go down the slope as fast.

In the picture the I would make the yard slope away from the wall (yellow arrows) and run down a depression (solid yellow line)

With the current situation the water will slowly under cut the wall eventually causing the wall to collapse.

PS I like the look of your yard

Thanks for the info and compliment! What would be best to backfill the wall with? what does the yellow line represent(depression)? just cut a trough in the existing dirt. Are you suggesting I may have success with bermuda after doing this although there is a lot of shade here?

Yes, you are 100% correct and the wall has actually already collapsed.. a little further down from the picture but I built it back this winter and added some re bar reinforcement...don't want that to repeat so looking for a longterm solution!

While you may make it with Bermuda, it does not like shade, so you may consider something else.

In looking at the background, it looks like there may be a culvert
(Between the tree and bush.) To resolve the problem, this ditch should
be reestablished so it does not run down on the wall but is contained by a berm at the wall.

I would lower the area on the yellow line so it is 8 to 12' lower than the ground at the wall. The material removed from the yellow line can be used to build up the area next to the wall. I would make it wide enough so that your mower can run through it with out scalping the grass. You do not have to capture all of the water coming toward the foreground of the picture, but you have to capture most of it an make sure it goes where you want it.

Good points by krnuttle.

Even if you filled in with several inches of chipped tree mulch where krnuttle's arrows are, that will stop the erosion while you're either reprofiling the soil or planting new ground cover.

I was thinking maybe bull rock in that area? They use that a lot around here at the base of rock walls where the Bermuda can't grow & it makes a nice transition. The Bermuda already is gone, plus shade & tree roots, so don't get your hopes up about it coming back. That's a good thing though, it'll stay out of whatever groundcover you choose.

Listen to these guys on the drainage, since you're already having problems they'll save you some future headaches in exchange for a bit of work now.

Thanks. I will work on solving the drain problem immediately and then look for ways to dressup the area. Will post more pictures//questions as I go. thanks