A bill introduced in Congress would allow struggling homeowners to withdraw funds from their retirement accounts tax free to pay their mortgage.
Sen. Johnny Isakson (R-Ga.) and Rep. Tom Graves (R-Ga.) submitted the Home Act Wednesday. Isakson also co-sponsored the Sen. Barbara Boxer (D-Calif.) bill that would eliminate fees and loan-to-value caps for Fannie Mae and Freddie Mac borrowers looking to refinance.
Borrowers could pull as much as $50,000 from their retirement account or one-half of the current value of their account, whichever is smaller, and avoid the typical 10% tax penalty. The cap is a lifetime cap, and does not expire on a particular date. Borrowers are eligible to make multiple withdrawals until they reach the cap.
The money must be put directly toward the mortgage within 120 days of withdrawal.
“This bill will help Americans who risk foreclosure use their own resources to make their mortgage payment on time without being penalized by the federal government,” Isakson said. “I firmly believe that economic recovery in this country will not occur until the housing market bounces back.”
“This legislation will simply place taxpayers who have saved responsibly on the same level as those who have not, all the while reducing foreclosures, eliminating red tape and accomplishing a goal that all members of Congress can support — keeping Americans in their homes,” Graves said.