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Congress weighs mortgage legislation


Many important legislative and consumer issues involving home mortgages have been reported on over the past several months, and it is time to revisit a few of them.

In February, it was reported that Sen. Lloyd Bentsen, D-Texas, was expected to introduce a bill that would allow first-time buyers or their parents to make penalty-free withdrawals from their retirement accounts to buy a house.

Mr. Bentsen did introduce the legislation a few weeks later, and an identical bill was introduced in the House of Representatives.

The measure would allow children or their parents to withdraw an unlimited amount of money from an individual retirement account and avoid the 10 percent penalty usually levied by the Internal Revenue Service if the money was used to purchase a home.

Workers who have 401(k) or 403(b) plans would be given the same break.

Some backers of the proposal have dubbed it "the new GI Bill" -- for "generous in-laws."

"Both bills are progressing nicely, and the outlook for passage is good," lobbyist Steven Dreisler said last week.

Mr. Dreisler works for the National Association of Realtors, one of many housing trade groups that support Mr. Bentsen's plan.

More than three-quarters of the nation's senators have signed on as co-sponsors of Mr. Bentsen's measure, and sentiment is nearly as strong in the House. "That's an important sign of congressional support," Mr. Dreisler said.

There is, however, at least one big hurdle that the bill must still jump: Mr. Bentsen must figure out how to pay for it. That means he will likely have to propose some form of new taxes or suggest cuts in other programs.

Mr. Dreisler said that Mr. Bentsen's experience as chairman of the influential Senate Finance Committee should help him fashion a payment plan "that the rest of Congress can support. If anybody can devise a way to pay for this program, it's Lloyd Bentsen," Mr. Dreisler said.

* While passage of the Bentsen bill should help would-be hom buyers, the news from Washington is not all good.

Several months ago information was reported about a Federal Housing Administration plan to raise the fees charged to borrowers who use the FHA's popular home-loan program.

The plan would require a borrower seeking a $100,000 FHA loan to pay an extra $1,000 in cash when the deal closed, and would increase the monthly payment by about $40.

Analysts for the FHA and several congressional representatives claim that the changes are needed to shore up the agency's shaky finances.

Other legislators -- along with real estate agents, lenders, builders and a handful of consumer groups -- have proposed less-expensive modifications that they say would make the program even stronger.

But the FHA has prevailed, and the new rules will go into effect July 1.

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