Home Act allows 401(k)s to be used for mortgage payments

U.S. Senator John Isakson, Republican from Georgia, and U.S. Representative Tom Graves, Republican from Georgia, recently introduced the HOME Act, which would allow homeowners to make withdrawals from their retirement accounts to pay timely mortgage payments. Borrowers can take money out of their qualified retirement plans penalty-free, with a lifetime cap of $50,000 or one-half of the present value of one's 401(k) account - whichever is smaller.

Isakson, who has worked in the real estate industry for many decades, said the Act could help homeowners facing foreclosure use their own resources to make timely payments on their mortgages without penalty from the federal government. The legislation will help stabilize home values, reduce foreclosures and help the housing market recover.

A member of Graves' Economic Advisory Council came up with the idea for the Act in response to many Americans not being able to withdraw retirement funds to pay for their home loans without facing a 10 percent penalty from the IRS under current tax law.

"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," said Graves in a statement.

In an interview Isakson said the bill will prevent foreclosures and help keep families stable in their homes, their largest single investments. Isakson said the government should not be penalizing borrowers for trying to keep their homes.

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