WASHINGTON— The Trump administration appears to be backing away from its controversial 50-year mortgage proposal and is reportedly preparing an executive order that would let Americans tap retirement and college savings accounts for penalty-free down payments on homes, according to senior administration officials and published reports.
The withdrawal of the long-term mortgage concept marks a shift in the White House’s housing affordability strategy, which has been under scrutiny amid persistently high home prices and tight inventory, Housing Wire reported.
Sharp Criticism
As the CU Daily reported earlier, the idea of extending mortgage amortization to 50 years — intended to lower monthly payments — drew sharp criticism from economists and housing industry leaders, who warned it could slow equity building for homeowners and conflict with current federal qualified mortgage rules. Federal Housing Finance Agency Bill Pulte first put the proposal forward, but FHFA officials have said the proposal was being evaluated and has been set it aside for “other priorities.”
EO Being Drafted
Instead, Housing Wire reported the administration is reportedly drafting an executive order aimed at expanding access to funds in 401(k) retirement plans and 529 college savings accounts for use as down payment money without incurring the typical tax penalties and early-withdrawal charges. Currently, early distributions from 401(k) plans generally trigger a 10% penalty plus income tax, and there is no broad penalty-free withdrawal option for home purchases under existing law.
Under the draft order, participants in employer-sponsored defined contribution plans would be permitted to draw from their retirement savings to help cover housing costs without facing the usual penalties, reporting Housing Wire, noting that could also extend to 529 college savings plans, which currently impose taxes and penalties if funds are used for non-qualified expenses.
Broader Push
The executive order would be part of a broader White House push to address housing affordability, although implementation may require congressional action because of the way the Internal Revenue Code governs retirement account penalties.
White House officials have not formally confirmed the specifics, and an administration spokesperson declined to comment pending an official announcement.
