Two Georgia congressmen are proposing a bill they believe will help some homeowners keep up with their mortgage payments and avoid foreclosure.
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Sen. Johnny Isakson (R-Georgia) and Rep. Tom Graves (R-Georgia) introduced the Hardship Outlays to protect Mortgagee Equity (HOME) Act, which would amend the Internal Revenue Code of 1986 ""to provide penalty free distributions from certain retirement plans for mortgage payments with respect to a principal residence and to modify the rules governing hardship distributions,"" states the bill.
""Many Americans who have been responsible enough to save for retirement in the past now find themselves out of work,"" Graves states. ""Unfortunately, under current tax law these men and women cannot withdraw retirement funds to pay for their homes without paying a ten percent penalty to the IRS â€" often resulting in late payments,
[COLUMN_BREAK]foreclosures, and at a minimum punishing a taxpayer who has saved responsibly in the past.""
Under the HOME Act, individuals may withdraw up to $50,000 or half of their 401(k) account - whichever is smaller - for the express purpose of making mortgage payments on their principal residence.
If the funds are used for mortgage payments within 120 days of withdrawal, the individual will not face penalties.
Deferred income tax, however, would not be waived for these withdrawals under the proposed bill.
""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 â€" keeping Americans in their homes,"" Graves states.
""I am delighted to join Congressman Graves in introducing the HOME Act today,"" Isakson stated. ""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.""
He continued: ""I firmly believe that economic recovery in this country will not occur until the housing market bounces back.""
""To that end, this legislation will help strengthen the American housing market because it will lead to a reduction in foreclosures and in turn will help stabilize home values,"" Isakson concluded.