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Coleman wants some penalties loosened
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WASHINGTON - Sen. Norm Coleman, R-Minn., has proposed legislation that would let homeowners who are late on their mortgage payments withdraw money penalty-free from their retirement accounts --401(k)s and IRAs -- to avoid foreclosure.
The bill would allow people who are 60 days late in their payments to withdraw up to $100,000 without paying the 10 percent penalty, through 2009. There would be no income tax as long as the withdrawals are paid back within three years. It would be limited to borrowers making no more than $114,000, or $166,000 for joint filers.
Beth Ann Bovino, an economist with Standard & Poor's in New York, said the bill could make sense as the "lesser of two evils."If it gives them a short-term period where they can actually get out of their obligations without much of a tax, and without being foreclosed on, maybe it is a positive," she said.
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