What is H.O.M.E. ?
The Hardship Outlays to protect Mortgagee Equity Act (HOME) is the legislation currently being discussed in Washington. HOME proposes to allow underwater homeowners to make tax-penalty-free hardship withdrawals from their 401(k) retirement accounts to avoid foreclosure.
The way the tax code currently stands, individuals who make early hardship withdrawals from their 401(k) accounts pay a 10% penalty in addition to income taxes. HOME pushes to remove the penalty and grant homeowners the right to withdraw up to $50,000 to either pay a delinquent mortgage, make up for lost household income or incorporate it in a lender’s loan modification arrangement. The legislation provides withdrawals be capped at 50% of the 401(k) account and requires the withdrawn amount be spent within 120 days. Proponents of HOME believe the plan gives distressed homeowners one last alternative to foreclosure while avoiding additional government expenditures.
This is the MOST STUPID of all the dumb, dumber and dumbest of the Federal Programs I’ve seen yet.
Let’s think about it.
The Homeowner should take money out of a 401(k) retirement account and dump it into an underwater home loan.
What stupid goober thought this one up? Some Banker I’d bet.
Who wins in this? The Banks – who get paid on a mortgage that should be flushed down the toilet; and the Federal Government (those folks that de-regulated the Banking Industry and allowed all this to happen in the first place) – who will have to continue to bail out the Banks if the homeowner defaults.
Why – WHY! – would someone with an ounce of sense want to spend “good” retirement money on a “bad” mortgage? They won’t.
Write off the loan losses.
Take the hit.
Yes, it will hurt the already hurt economy even more. But then – and only then – will we be able to begin a true recovery.
I couldn’t agree more. The government needs to stop trying to save people that can’t really be saved. The owners will be much better off keeping their retirement intact, they’re going to need it. Let the house be foreclosed on, negotiate a short sale, whatever, just get out from under it so you can start fresh. This will all be a bad dream in 10 years, don’t still be paying for a bad decision twenty years down the road when you want to retire.
I told my agents back when the sub-prime mess started that the worst thing that could happen is that the government would try to “fix it”. They’ve tried, and failed, and failed again with so many programs we can’t even keep track of them. And saved how many homeowners? A few thousand at best and for how long? At what cost to the American taxpayer?
Just let market correct itself so the country can get on with the recovery. Until the housing market stabilizes and these upside down delinquent mortgages are gone, no one gets to recover.