Bill Would Allow Withdrawals from Retirement Accounts for Mortgages

A New York Congressman has proposed allowing homeowners with resetting adjustable rate mortgages to pull up to $25,000 out of retirement accounts or IRAs to be used to pay their mortgages or refinance into a fixed-rate home loan.

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.

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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.

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