According to a news report in the Staten Island Advance, the legislation proposed by U.S. Representative Vito Fossella (R-New York), would apply to adjustable rate mortgages resetting between 2005 and 2009.
Eligible homeowners cannot have incomes of more than $114,000 for a single person and $166,000 for a couple, and the withdrawal must be carried out within 90 days of the scheduled mortgage interest rate reset.
To encourage repayment, homeowners would not be taxed for additional income if the loan is repaid within five years, according to the Advance.
“I think it’s a common sense way of allowing individuals who may be having mortgage issues to tap into their own accumulated capital to help them through a period of financial duress,” said Fossella of his proposed Homeowners Assistance Act, in the news report.
Officials say a major contributing factor to the nation’s mushrooming problem of home foreclosures was lenders granting loans to borrowers who could not afford the post-reset mortgage payments.