Norm Coleman: We can help folks keep their homes

One solution is to let those in trouble use their retirement savings without penalty.

By Norm Coleman

Last update: October 28, 2007 - 4:06 PM

Across Minnesota, homeownership carries different meanings for different people. For some, it is where memories are made and where their families grow. For others, it is about being a member of the ownership society and a source of wealth creation. And for many, it provides a sense of community.

For these reasons, all of us should be deeply concerned by the significant increase in the number of foreclosures that have occurred already and the projections of worse to come, as a record number of adjustable-rate mortgages are due to reset in the months ahead.

Without a doubt, the deepening housing downturn is about more than just those who are having trouble meeting their mortgage payments. It is about falling home values, sales and new housing construction -- all of which are having an adverse effect on our national and state economies at a macro level, not to mention direct effects on the homeowner, the construction worker, the real-estate agent, the mortgage lender, the timber worker and so on. In the midst of these challenges, our society is stronger when working families can keep their homes and build equity.

This is a sobering reality for Minnesotans because we rank fourth in the nation in the percentage of subprime mortgages in foreclosure, with 17 percent of subprime adjustable-rate mortgages currently past due. On a national level, foreclosures have almost doubled in the last year, and more than 14.5 percent of subprime mortgages are past due. Behind these statistics are real people who are in serious trouble.

The answer is not a government bailout; there is no single solution to this crisis. But there are reasonable and measured steps that can help folks stay in their homes during these difficult times.

One option is to allow low- to middle-income homeowners penalty-free access to their retirement savings, as long as the withdrawals are paid back to the retirement accounts. Homeowners should be given the power to decide whether it makes financial sense to turn to their retirement savings to keep their homes. This option would give hope to those who are facing foreclosure and would not penalize them for trying to keep their homes and remain in their communities.

We also can allow eligible homeowners to refinance with Federal Housing Administration-backed loans and make mortgage debt forgiveness tax-free. And we need to increase penalties for fraud and ensure prepurchase counseling for first-time home buyers.

If left unchecked, the effects of the mortgage crisis will undoubtedly have a ripple effect that spreads far beyond the individuals facing foreclosure.

Norm Coleman, R-Minn., is a U.S. senator. He recently introduced legislation to allow homeowners who are 60 days late in their mortgage payments to withdraw up to $100,000 from their retirement accounts through 2009 to be used to refinance or avoid foreclosure.

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