There is currently a bill in the US Senate dealing with the predatory lending crisis, and there is a small provision in it that is really important to keep. The provision lets judges who preside over bankrupt homeowners modify terms of loans to make them affordable. Back before we started selling homeowners down the river, this was the law. Let's just say the changes have not yielded positive results.

This bill would protect an estimated 600,000 people, and save homeowners surrounding foreclosures an estimated 72 billion dollars in lost home values. And, it costs us nothing. It simply gives judges the latitude in bankruptcies the same latitude they have if you showed up to bankruptcy with other assets- like investment income, a boat, etc.

This is a sensible, win-win measure that could be really, really important to keeping people in their homes. And right now, Arlen Specter is a key vote in getting this out of the Senate. (A companion bill would likely pass the House.)

I just called Arlen Specter's office, and I would strongly encourage you to do the same. All you have to do is say something like this:

I encourage Senator Specter to support the Durbin Bill- Title IV of Senate Bill 2636, to allow modifications to mortgages in the bankruptcy process.

His phone number is (202) 224-4254, and your one minute call can really make a difference.

Below the fold, is a memo from the Center for Responsible Lending about why this bill is so important. One minute can make a difference.

Call today!

Brady wrote earlier about the need for a well-stocked rescue fund, and talked a little bit about why everyone should care about the crisis in subprime lending.

First though, let me just say that this is not new. In fact, the scope of the crisis in Philadelphia does not even appear to be all that changed from a year ago. It was high then, it is high now.

Foreclosures in Philadelphia skyrocketed about 10 years ago, to thousands per year. Any rise in foreclosures in the last year here is really nothing compared to the growth that we had from the mid-1990s to the early part of this decade. The reason you are hearing about it now is simply because Wall Street is now being hit by the crisis.

So, again, people in Philly have been getting slammed by subprime lenders for years. And much of that is because Dwight Evans and Vince Fumo killed the City's predatory lending bill. We can talk about how much blame regulators should get for this crisis (a lot), or Wall Street should get (a lot), but in Philadelphia we had a great bill, and it was crushed by our own legislators. The pain of a lot of homeowners simply would not exist in Philly if they didn't do the financial services industry's bidding back in 2001, and made sure there was a big 'open for business' sign for crappy lenders.

Anyway, back to why everyone should care, aside from basic morality: If you are a homeowner, a foreclosure in your neighborhood costs you money. Ira Goldstein (my sometimes boss) of the Reinvestment Fund and Dick Voight of EConsult conducted a study in Philadelphia to determine, other factors controlled for, whether a foreclosure affects surrounding home values. They found that for each foreclosure within 1/8th of a mile (or roughly one block) of your home, you lose 1 percent of your value. Considering that many blocks have upwards of 5 or more foreclosures, that is a very significant loss of value. (There is an outline of the study here.)

And, Dan Immergluck conducted a study in Georgia that found very similar results. There they found each foreclosure within 1/8th of a mile costs a property 0.9 percent of its value. (And they also found, unsurprisingly, increased crime.) Immergluck has, I believe, started to find similar results in other studies, as well.

Which is to say that this may seem like an abstract problem. But in all but very few neighborhoods in the City, there are a ton of foreclosures. And each one is yanking at the pocket of Philadelphia homeowners.