The Obama administration's Making Home Affordable loan modification program has stumbled out of the gate. Through July, only 160,000 homes went into trial modifications, according to the Government Accountability Office. (The Obama administration pegged the number a bit higher at 235,250, but the number of successful modifications is undoubtedly lower than that.) Meanwhile, foreclosures keep stacking up. In Illinois alone, 13,000 homeowners received a foreclosure notice last month. And the economic devastation is focused in communities least able to recover. A new paper by the Woodstock Institute found that vacant, lender-owned properties "are concentrated in African American communities, go unsold longer, and incur greater losses to the lender." Clearly, more action is required to protect vulnerable homeowners and the communities in which they live.

Enter Sen. Dick Durbin and three of his Senate colleagues. Yesterday, they introduced a bill titled the "Preserving Homes and Communities Act of 2009" that would expand federal loan-modification programs to more borrowers and crack down on lenders eager to foreclose on delinquent homeowners. Bloomberg has more:

The legislation, introduced today by Senator Jack Reed of Rhode Island, would require lenders to evaluate all borrowers for affordable loan modifications before initiating foreclosure. It would also require banks to offer and approve a loan modification if the restructured mortgage returns more money, the so-called net-present value, to investors than would foreclosure.

The proposal would establish new penalties and would let borrowers overturn foreclosures if lenders fail to comply. It would also place new limits on fees charged in foreclosure.

The senators plan also includes provisions to provide more people with access to affordable housing. An additional $6.3 billion in federal funds would be available to states offering homeowners grants or subsidized loans.  Another $1 billion would be spent on building or rehabilitating affordable housing stock.

Unfortunately, Durbin's mortgage modification idea has been placed on the back burner, meaning the problem of negative equity still has not been addressed by the White House or Congress. Even so, the banking lobby has come out with guns blazing, identifying a number of measures they consider non-starters.

Durbin isn't backing down, telling reporters yesterday that "it’s long past time for the Senate to step up to keep families in their homes and to help lead the way toward economic recovery.”

Closer to home, hundreds of Chicago residents affiliated with National People’s Action will meet with officials from the Federal Reserve and the Federal Reserve Bank of Chicago on the Southwest Side to discuss solutions to the foreclosure crisis ripping through the city. Here's what they will likely propose, according to a press release:

A number of local and federal solutions will be proposed at the meeting to help keep families in their homes. Residents will ask Aldermen to support a city ordinance to help provide resources to prevent foreclosures. The ordinance includes directing 50% of the fees and fines collected under the Vacant Property Ordinance to foreclosure counseling and outreach and mediation.

On the federal level, Federal Reserve officials will be asked to ensure that lending and the banking system are fair, transparent and accountable to the American people. Federal Reserve officials will also be asked to convene the top five foreclosing banks in Chicago (in no particular order: US Bank, Wells Fargo, JP Morgan Chase, Bank of America and Deutsche Bank) to create solutions that work for families and keep people in their homes.

Image used under a Creative Commons license by Flickr user jbrownell.