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Now while the White House works on their plan to help struggling homeowners to Republican lawmakers from Georgia have come up with their own bill to help those on the verge of foreclosure save their homes senator Johnny Isaacson cosponsor of the home act joins me now with deet -- welcome senator great to see you tell us about this plan you have.
How would it help people on the verge of foreclosure.
Well basically the bill -- a third exception for early withdrawal without penalty for my 401K plan.
Currently under the law you can withdraw for college tuition or medical emergency.
This just makes home mortgage reduction a third exercise -- option.
Where you could withdraw up to 50% of your value of your 401K or 50000 dollars whichever is less.
Played down your mortgage loan.
Help people stay in their home helping preserve the biggest asset that most families.
Now my understanding of it is that you could actually use it to pay down your mortgage if you're behind in somebody in the household is unemployed.
You could use it to get a new loan if we need do is refi get a lower rate there's actually some options there.
I you said and I wanna get for some of these details withdraw up to 50000.
You have to use that money within a 120 days meet the definition of -- ship.
But there's no 10% penalty.
And you don't pay it back the only obligation the person who makes this hardship withdrawal is that they have to pay income taxes on.
Right that is that is correct.
Are right so you you don't get away Scot free but you get some help in the beauty of this program reminder that advantage.
Is that the government -- on the hook.
And it gives you control of your money without a penalty from the government to -- try and protect the biggest asset your family probably head.
-- -- -- -- What are the issues here -- I think is that we tried programs again and again and again I.
I don't know if you've looked.
At the list of programs out there making home affordable but I mean it's we're talking scores of programs out there.
Why will this be successful when the government programs have not been successful.
Well first of all of the government programs have been tried like the -- program over half of those modifications were back in the fall within six months.
But that was using other people's money or -- negotiations with -- -- This is a homeowner using their own discretion take part of their life savings.
Protect their investment so it'll be well used it'll be that are beneficial to family will not hurt the government will be the use of private money to help solve a private problem.
And of course yeah folks obviously have to be careful with this because your 401K -- IRA that is their money when they retire.
People have to do this judiciously right.
Oh absolutely but you know and we we realized we wrote the 401K legislation that you may have a medical emergency.
We realized you may have us college education emergency nobody ever thought well what happened what has happened the housing market would have happened.
I was in the business two years I know -- they will come back this is a bridge to give people a chance to protect their assets and let their home value come back.
I like the ways said that a bridge to help people protect their asset I think.
One of the things ignored in this whole conversation is that -- home is off of the biggest store of value that Americans have.
When they retire it's the biggest nest egg that they found.
But I I have to ask you about this new mortgage plan that's being floated out there by state AG's -- federal government.
About a plan today outlined in the pages of the Wall Street Journal that would allow people not people who are behind on their mortgage but people who -- current.
To get a new loan.
Now this is pretty controversy -- some folks say that the banks want won't want to forego let the stream of revenue in terms of interest.
In come but.
What do you make of this plan is it workable.
Well I haven't seen the details of the administration planned but I introduced along with senator boxer from California.
A bill that would allow loans owned by Freddie Mac or Fannie Mae.
That are current and being paid to be brief brief brief financed at their principal balance without penalty or cost at the lower interest rates today.
That makes a lot of sense because it takes somebody who's making their payments is doing what they're supposed to do.
Gives them an opportunity to re financing current lower interest rates to three and three quarters or -- a quarter percent vs what maybe a 56 or 7% loan.
That gives them a little more cushion every month and less monthly payment is more likely to see that house -- as a homeowner rather than become a foreclosure and then that.
Senator the banks haven't cooperated any any of the government bailout plans today why would they work with the government on that us.
Well that remains to be say you're talking about the administration proposal are strong loans owned by Freddie or Fannie.
I believe the administration can adopt that about policy and I think it makes good sense.
Banks are talking about an investment upon which they have an interest but if I -- -- banker today.
Looking at the volume of foreclosure in America and the amount of loss that comes from a foreclosure to an institution.
I think twice about looking the other way on this this may give them a chance preserve their principal may reduce -- internal bit a lot less than it's going to cost -- they have take the house -- Well and I think that's been a calculation they've been making all -- Senator Isaacson thanks for joining us today a pleasure to speak with -- -- thank.