HOME Act Eases 401(k) Access for Mortgage Payments

A pair of Georgia legislators have introduced a bill that would open up 401(k) accounts to help make mortgage payments.


U.S. Senator Johnny Isakson (R-Georgia) and U.S. Representative Tom Graves (R-Georgia) last week introduced the HOME Act, a bill to allow Americans to make withdrawals from their retirement accounts to pay timely mortgage payments, in the U.S. Senate and the U.S. House of Representatives. 

The HOME Act allows a taxpayer to withdraw money from a qualified retirement plan penalty free to make mortgage payments toward his primary residence with a lifetime cap of $50,000 or one-half of the present value of one’s 401(k) account (whichever is smaller), so long as those funds are used for that purpose within 120 days of withdrawal.  Deferred income tax otherwise due on those withdrawals would still be due to the Internal Revenue Service.

According to the announcement, the idea for the HOME Act came from a member of Congressman Graves’ Economic Advisory Council.  The council met last December with Graves who was seeking ideas and feedback from business and community leaders on ways to jumpstart the struggling economy.  Graves then took the proposal to Senator Isakson who is spearheading the legislative efforts in the U.S. Senate.

Isakson, who, according to a press release, spent over three decades in the real estate industry, said, “I am delighted to join Congressman Graves in introducing the HOME Act today. 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. 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.”

Graves said, “The housing market has borne the worst of our current economic downturn.  Buyers have been unwilling to buy and sellers unable to sell.  At the same time, foreclosures have increased, forcing families out of their homes while flooding the housing market with unwanted and abandoned properties – further eroding home values in our communities.  Many Americans who have been responsible enough to save for retirement in the past now find themselves out of work.  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 – often resulting in late payments, foreclosures, and at a minimum punishing a taxpayer who has saved responsibly in the past.  Instead of penalizing these Americans, I, along with Senator Isakson, today introduced the Hardship Outlays to protect Mortgagee Equity (HOME) Act, allowing taxpayers to withdraw funds from their retirement accounts penalty free to make mortgage payments on time.  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.”

The HOME Act is available at http://tomgraves.house.gov/UploadedFiles/HOME_Act-Tom_Graves_Bill_Language.pdf.