I have just read an article in the LA Times online (latimes.com), which may come as a bit of good news for some homeowners.  Low and middle-income homeowners who are having difficulties with their mortgage payments may soon be receiving help from Congress.  Pending legislature would allow homeowners to draw funds from their retirement funds without incurring penalties in order to get current with their payments or refinance their adjustable rate loans into more affordable fixed-rate loans.

The Federal Housing Administration Modernization Act introduced by Senator Norm Coleman (R-Minn), would raise the limits on loans and reduce payments in Higher-cost areas of California and the East Coast.  This bill was approved on September 19; however, there has been no progress since.

The Home Ownership Emergency Act would allow borrowers who are at least 60 days behind on their payments to withdraw up to $100,000 (penalty-free) from their retirement accounts in order to bring current loans up to date or refinance into a better loan structure.

These new laws would allow certain borrowers in tight situations a renewed flexibility to help them solve their difficulties while providing exemption from the standard 10% Fed tax penalties associated with drawing from pension funds.  These bills would only be effective until the end of 2009 and the amounts drawn must be redeposited into the pension funds within a period of three years.  These benefits are limited to taxpayers with minimum adjusted gross incomes of$166,000 for joint filers and $114 for single filers.  Speculators and investors are excluded from these benefits as they are solely for mortgages on owner-occupied principle residences.

Hopefully, for those who can use the help, these bills will go into effect soon.  Click to read this article entitled, "Relief sought for strapped owners".