A team of Senators, who say they are fed up with the mortgage modification efforts of the nation's largest servicers, believe it's time to make the appropriate changes to make lenders modify certain loans and limit the foreclosure practices of those same firms.

Newly introduced legislation, titled the Preserving Homes and Communities Act of 2009, introduced by Rhode Island Senator Jack Reed (D) and cosponsored by Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI) and Jeff Merkley (D-OR), may require some lenders to meet face-to-face with certain distressed borrowers to discuss options to foreclosure.

If successful, lenders and servicers must offer modifications to homeowners if the net present value of modification is greater than that of foreclosure. Limits on foreclosure fees will also be limited and a national database tracking foreclosures will be created. Firms that do not comply may face strict penalties that are not yet disclosed, but according to a statement on the subject, will be "meaningful."

"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," he added.

"As foreclosure rates continue to climb, a lasting economic recovery becomes harder to reach," said Durbin.  "Until we stabilize the housing market, we simply won’t get a handle on the broader economic crisis. Voluntary efforts to keep families in their homes have failed."

Other points of the proposed legislation will authorize state-sponsored mediation programs as well as a system for distributing grant money to borrowers who are struggling to make payments, regardless of the mortgage product they are participating in.

"More and more households are finding that even with a fixed-rate mortgage that they could afford before the recession, they are just one pink slip away from losing their biggest investment," he adds.

"In the last year, the federal government has taken decisive action and devoted substantial financial resources to shoring up financial markets, averting a potential national and global financial meltdown," said Reed. "Despite federal efforts, the number of foreclosures continues to rise at an alarming rate on pace to surpass last year’s foreclosures by a third."

Write to Jacob Gaffney.