[Congressional Record Volume 153, Number 158 (Thursday, October 18, 2007)]
[Senate]
[Pages S13090-S13091]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COLEMAN:
  S. 2201. A bill to provide for the penalty-free use of retirement 
funds for mortgage delinquency relief; to the Committee on Finance.
  Mr. COLEMAN. Mr. President, I rise today to introduce the Home 
Ownership Mortgage Emergency Act, HOME Act, my good friend Senator 
Martinez.
  This bill seeks to provide a measure of relief to those homeowners 
who are having troubles meeting their mortgage payments and as a result 
are facing the prospect of having their homes foreclosed.
  As a former Mayor, I know the value and importance homeownership has 
on our communities. Housing is after all one of the foundational assets 
of our society. Policies encouraging homeownership is a good thing, not 
just for our communities but also for first-time homebuyers who through 
homeownership can be a part of the ownership society.
  Over the years, we made great progress as the homeownership rate has 
increased from 64 percent in 1994 to 69 percent in 2006. That is why I 
am very troubled 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, putting an increasing number of homeowners at 
serious risk of losing their homes. According to one estimate, $515 
billion in adjustable rate mortgages are due to reset this year and 
$680 billion next year.
  To underscore the seriousness of the situation, Mr. President, just 
consider these sobering figures. My State ranks 4th in the Nation in 
terms of the percentage of subprime mortgages in foreclosures, and 
currently 17 percent of subprime adjustable rate mortgages are past 
due. More generally, the number of foreclosures has increased 183 
percent in the last year. Nationally, foreclosures have almost doubled 
in the last year, and more than 14.5 percent of subprime mortgages are 
past due.
  While there is no one single solution to the housing crisis, there 
are a number of reasonable, measured efforts we can undertake that can 
help folks stay in their homes in these difficult times. To that end, I 
am introducing the HOME Act, which would allow low-to-middle income 
homeowners penalty-free access to their retirement savings and allow 
tax free distributions from their retirement savings so as long as the 
withdrawals are paid back to the retirement accounts.
  More specifically, my bill would allow homeowners who are 60 days 
late in their mortgage payments to withdraw penalty-free up to $100,000 
through 2009 to be used to refinance into an affordable mortgage or 
avoid foreclosure. Except for very limited cases, a 10 percent penalty 
is applied to early retirement distributions. As the tax code currently 
waives this penalty for distributions from Individual Retirement 
Accounts for first-time home purchases, I think it is only fair that we 
waive this penalty for those who want to keep their homes.
  Bottom-line, this bill is about helping homeowners help themselves. 
While the 10 percent penalty is well-intentioned in that we want people 
to avoid using their retirement savings during their working years, 
times like these require us to recognize that sometimes such rules can 
be counterproductive. Both on a homeowner level and on a community 
level, I believe that it makes sense to enable those, who can, to keep 
their homes. Ultimately it is up to the homeowner to

[[Page S13091]]

decide whether it makes financial sense to turn to their retirement 
savings to keep their homes. At the very least however, for those who 
do decide to do so, we should not penalize them for trying to keep a 
roof over their heads and wanting to remain a part of the community 
they have called home.
  I urge my colleagues to support this measure as we seek to help out 
homeowners in trouble.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2201

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Home Ownership Mortgage 
     Emergency Act'' or the ``HOME Act''.

     SEC. 2. TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS FOR 
                   MORTGAGE DELINQUENCY RELIEF.

       (a) In General.--Section 72(t) of the Internal Revenue Code 
     of 1986 shall not apply to any qualified mortgage delinquency 
     relief distribution.
       (b) Aggregate Dollar Limitation.--
       (1) In general.--For purposes of this section, the 
     aggregate amount of distributions received by an individual 
     which may be treated as qualified mortgage delinquency relief 
     distributions for any taxable year shall not exceed the 
     excess (if any) of--
       (A) $100,000, over
       (B) the aggregate amounts treated as qualified mortgage 
     delinquency relief distributions received by such individual 
     for all prior taxable years.
       (2) Treatment of plan distributions.--If a distribution to 
     an individual would (without regard to paragraph (1)) be a 
     qualified mortgage delinquency relief distribution, a plan 
     shall not be treated as violating any requirement of the 
     Internal Revenue Code of 1986 merely because the plan treats 
     such distribution as a qualified mortgage delinquency relief 
     distribution, unless the aggregate amount of such 
     distributions from all plans maintained by the employer (and 
     any member of any controlled group which includes the 
     employer) to such individual exceeds $100,000.
       (3) Controlled group.--For purposes of paragraph (2), the 
     term ``controlled group'' means any group treated as a single 
     employer under subsection (b), (c), (m), or (o) of section 
     414 of such Code.
       (c) Amount Distributed May Be Repaid.--
       (1) In general.--Any individual who receives a qualified 
     mortgage delinquency relief distribution may, at any time 
     during the 3-year period beginning on the day after the date 
     on which such distribution was received, make one or more 
     contributions in an aggregate amount not to exceed the amount 
     of such distribution to an eligible retirement plan of which 
     such individual is a beneficiary and to which a rollover 
     contribution of such distribution could be made under section 
     402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) of the 
     Internal Revenue Code of 1986, as the case may be.
       (2) Treatment of repayments of distributions from eligible 
     retirement plans other than iras.--For purposes of such Code, 
     if a contribution is made pursuant to paragraph (1) with 
     respect to a qualified mortgage delinquency relief 
     distribution from an eligible retirement plan other than an 
     individual retirement plan, then the taxpayer shall, to the 
     extent of the amount of the contribution, be treated as 
     having received the qualified mortgage delinquency relief 
     distribution in an eligible rollover distribution (as defined 
     in section 402(c)(4) of such Code) and as having transferred 
     the amount to the eligible retirement plan in a direct 
     trustee to trustee transfer within 60 days of the 
     distribution.
       (3) Treatment of repayments for distributions from iras.--
     For purposes of such Code, if a contribution is made pursuant 
     to paragraph (1) with respect to a qualified mortgage 
     delinquency relief distribution from an individual retirement 
     plan (as defined by section 7701(a)(37) of such Code), then, 
     to the extent of the amount of the contribution, the 
     qualified mortgage delinquency relief distribution shall be 
     treated as a distribution described in section 408(d)(3) of 
     such Code and as having been transferred to the eligible 
     retirement plan in a direct trustee to trustee transfer 
     within 60 days of the distribution.
       (d) Definitions.--For purposes of this section--
       (1) Qualified mortgage delinquency relief distribution.--
     Except as provided in subsection (b), the term ``qualified 
     mortgage delinquency relief distribution'' means any 
     distribution from an eligible retirement plan made on or 
     after the date of the enactment of this Act and before 
     January 1, 2010, to an individual--
       (A) whose acquisition indebtedness (as defined in section 
     163(h)(3)(B) of the Internal Revenue Code of 1986, without 
     regard to clause (i) thereof) with respect to the principal 
     residence of the taxpayer is in delinquency for at least 60 
     days, and
       (B) whose adjusted gross income (as defined in section 62 
     of the such Code) for the taxable year of such distribution 
     does not exceed $114,000 ($166,000 in the case of a joint 
     return under section 6013 of such Code).
       (2) Eligible retirement plan.--The term ``eligible 
     retirement plan'' shall have the meaning given such term by 
     section 402(c)(8)(B) of such Code.
       (3) Principal residence.--The term ``principal residence'' 
     has the same meaning as when used in section 121 of such 
     Code.
       (e) Income Inclusion Spread Over 3 Year Period for 
     Qualified Mortgage Delinquency Relief Distributions.--
       (1) In general.--In the case of any qualified mortgage 
     delinquency relief distribution, unless the taxpayer elects 
     not to have this subsection apply for any taxable year, any 
     amount required to be included in gross income for such 
     taxable year shall be so included ratably over the 3-taxable 
     year period beginning with such taxable year.
       (2) Special rule.--For purposes of paragraph (1), rules 
     similar to the rules of subparagraph (E) of section 
     408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
       (f) Special Rules.--
       (1) Exemption of distributions from trustee to trustee 
     transfer and withholding rules.--For purposes of sections 
     401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 
     1986, qualified mortgage delinquency relief distributions 
     shall not be treated as eligible rollover distributions.
       (2) Qualified mortgage delinquency relief distributions 
     treated as meeting plan distribution requirements.--For 
     purposes of such Code, a qualified mortgage delinquency 
     relief distribution shall be treated as meeting the 
     requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 
     403(b)(11), and 457(d)(1)(A) of such Code.
       (g) Provisions Relating to Plan Amendments.--
       (1) In general.--If this subsection applies to any 
     amendment to any plan or annuity contract, such plan or 
     contract shall be treated as being operated in accordance 
     with the terms of the plan during the period described in 
     paragraph (2)(B)(i).
       (2) Amendments to which subsection applies.--
       (A) In general.--This subsection shall apply to any 
     amendment to any plan or annuity contract which is made--
       (i) pursuant to any amendment made by this section, or 
     pursuant to any regulation issued by the Secretary of the 
     Treasury or the Secretary of Labor under this section, and
       (ii) on or before the last day of the first plan year 
     beginning on or after January 1, 2010, or such later date as 
     the Secretary of the Treasury may prescribe.
     In the case of a governmental plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), clause (ii) 
     shall be applied by substituting the date which is 2 years 
     after the date otherwise applied under clause (ii).
       (B) Conditions.--This subsection shall not apply to any 
     amendment unless--
       (i) during the period--

       (I) beginning on the date the legislative or regulatory 
     amendment described in subparagraph (A)(i) takes effect (or 
     in the case of a plan or contract amendment not required by 
     such legislative or regulatory amendment, the effective date 
     specified by the plan), and
       (II) ending on the date described in subparagraph (A)(ii) 
     (or, if earlier, the date the plan or contract amendment is 
     adopted),

     the plan or contract is operated as if such plan or contract 
     amendment were in effect; and
       (ii) such plan or contract amendment applies retroactively 
     for such period.
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