Tiberi Amendment Would Help Owners Help Themselves in Housing Crunch

Press Release

TIBERI AMENDMENT WOULD HELP OWNERS HELP THEMSELVES IN HOUSING CRUNCH

Penalty-Free IRA Withdrawal To Pay Down Mortgage Principal, Targeted, Limited, Has Lasting Impact

U.S. Congressman Pat Tiberi (R-OH) today introduced an amendment during the Ways and Means committee markup of H.R. 5720, the Housing Assistance Act of 2008, to provide homeowners additional tools and options to allow them to stay in their homes during the current housing crunch. Congressman Tiberi's amendment would allow homeowners to withdraw up to $50,000 from their Individual Retirement Account (IRA), without the normal 10 percent penalty for early withdraw, to pay down principal on a mortgage when refinancing.

"This commonsense measure would help homeowners help themselves when they find themselves in mortgage trouble," said Congressman Tiberi, a member of the Ways and Means Committee. "This amendment provides another option for homeowners who are trying to do the right thing, stay in their homes and get back on the right financial track. This measure would only be in effect for 2008. The targeted and limited approach provides a vital tool for homeowners caught in the current housing crunch, while providing long term benefits. It allows homeowners to pay down principal, reducing monthly payments for the life of their mortgage."

The IRS already allows for some penalty-free early withdrawals from IRAs for some higher education expenses, health insurance premiums for unemployed individuals, first home purchases, and for military reservists called to active duty. This amendment would add a withdrawal used to pay-down principal when refinancing a mortgage, to the list of current exemptions. The measure would allow the withdrawal to also be used to pay closing costs incurred during the refinancing and it limits the amount of the withdrawal to no more than $50,000 (principal and closing costs combined). While the 10 percent early withdrawal penalty is waived, it is still counted as income in 2008.

"Joint Committee on Taxation experts indicate that many homeowners find an early withdrawal from their IRA as the best option when they need assistance keeping their homes even WITH the 10 percent withdraw penalty. I believe we should be providing more tools to help them, instead of kicking them when they're down, by imposing the penalty. This measure helps homeowners who are trying to do the right thing during the current housing crisis," Congressman Tiberi added.

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