[Congressional Record Volume 145, Number 165 (Friday, November 19, 1999)]
[Senate]
[Page S15112]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself and Mr. Bryan):
  S. 1994. A bill to amend the Internal Revenue Code of 1986 to provide 
assistance to first-time homebuyers; to the Committee on Finance.


               the first time homebuyer affordability act

  Mr. KERRY. Mr. President, earlier this week I laid out an agenda for 
restoring the federal role in expanding the nation's stock of 
affordable housing. Today, I am making a small downpayment on that 
promise with the First Time Homebuyer Affordability Act. This 
legislation, which I am introducing with Senator Bryan, will create new 
homeownership opportunities for many Americans by allowing them to 
borrow from their Investment Retirement Accounts (IRAs), or their 
parents or grandparents IRAs, on a tax free basis for a downpayment on 
a first home. The legislation would also allow IRA funds to be used 
under an equity participation agreement. In both cases, the funds would 
have to be repaid to the IRA.
  We have all talked about the importance of homeownership. Indeed, 
homeownership makes a very significant contribution to solving many 
social problems we face in America. Children of homeowners are less 
likely to become involved in the criminal justice system; they are less 
likely to drop out of school, or have children out of wedlock. 
Homeowners vote more often and participate more in community 
organizations and activities.
  Yet, the single biggest barrier to homeownership is a downpayment. 
This legislation will help hundreds of thousands of homeowners surmount 
this barrier and realize the American dream.
  Mr. President, it is ironic that IRAs today can be invested in almost 
any asset, including real estate investment trusts, except one's own 
home. Yet, homeownership continues to be a winning investment, both for 
the family and the community.
  Under current law, individuals may borrow up to $10,000 from their 
401(k) retirement accounts to help buy a home without paying taxes. 
This legislation would put IRAs on the same footing as 401(k) plans 
while unlocking $2 trillion in IRA saving to help families become 
homeowners. It has a number of protections to ensure that the loan or 
investment will be repaid, with interest, or a taxes will be owed and a 
penalty assessed.
  This is good legislation, which has been endorsed by the Mortgage 
Bankers Association, the National Association of Realtors, and the 
National Association of Homebuilders. I urge my colleagues to support 
this bill.
  Mr. President, I ask unanimous consent that a letter of support be 
printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

       Dear Senator: We are writing to add our support for your 
     efforts to enhance homeownership opportunities through 
     expanded use for first time homebuyers of their Individual 
     Retirement Accounts (IRAs). We will work closely with you and 
     your colleagues to include this important provision in the 
     Senate Tax Bill.
       The United States has recently achieved a record 
     homeownership rate, rising home prices, combined with a 
     significant downpayment hurdle, continue to put homeownership 
     out of the reach of many families and individuals. Finding 
     ways to overcome the downpayment issue is critical to the 
     effort to make homeownership more affordable and obtainable 
     for these families and individuals. Your proposal provides 
     this bridge to enhance homeownership for millions of 
     Americans.
       Your plan would build upon the penalty waiver provisions 
     enacted in the 105th Congress to improve access to the $2 
     trillion held in IRAs for first time home purchase. Penalty 
     waiver provisions now permit people to withdraw up to $10,000 
     from an IRA account for the purchase of a first time home 
     without incurring a 10 percent premature withdrawal penalty.
       However, even with the penalty waiver, a prospective 
     homebuyer still owes federal and state taxes on the amount 
     withdrawn from the IRA. This reduces the amount available for 
     downpayment by thousands of dollars. The plan would eliminate 
     such tax consequences by allowing an individual to borrow up 
     to $10,000 from their IRA account or a parent's IRA account, 
     for a first time home purchase without a tax penalty. IRA 
     funds may also be used under an equity sharing arrangement.
       At present, holders of 401(k) retirement accounts may 
     borrow up to 50 percent of account assets, with a floor of 
     $10,000 and a ceiling of $50,000, for any personal use. 
     However, borrowing from an IRA account is prohibited, even 
     for a first time home purchase.
       We will work with you to move this key proposal forward to 
     enhance and expand homeownership for all Americans.
           Sincerely,
       Mortgage Bankers Association of America.
       National Association of Realtors.
       National Association of Home Builders.
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