Sen. Coleman proposes bill to combat foreclosures

Sen. 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.

Coleman's bill comes amid the housing industry's steepest downturn in 16 years and a rising wave of foreclosures.

It would allow people who are 60 days late in their payments to withdraw up to $100,000 from retirement accounts -- such as an IRA or 401(k). They could do that without paying the 10 percent penalty, through 2009.

There would be no income tax as long as the withdrawals are paid back within three years. It would be limited to borrowers making no more than $114,000, or $166,000 for joint filers.

People can already borrow against a 401(k), but Coleman says his bill would exempt repayments from interest.