Lawmaker Proposes Penalty-Free Retirement Account Withdrawals for Mortgage Payments

Minnesota Senator Norm Coleman has proposed legislation that would let homeowners who are late on their mortgage payments withdraw money penalty-free from their retirement accounts to avoid foreclosure.

The Republican lawmaker's proposal would allow these individuals to withdraw up to $100,000 without paying the standard 10% early withdrawal penalty through 2009. There would be no income tax payment required as long as the withdrawals are paid back within three years.

For joint filers, the amount would be limited to borrowers making no more than $114,000 or $166,000.