To provide for the penalty-free use of retirement funds for mortgage relief.

Summary: Homeowners' Assistance Act of 2007 - Exempts any qualified mortgage relief distribution from the 10% additional tax imposed by the Internal Revenue Code on early distributions from qualified retirement plans.

Provides that the aggregate amount of distributions received by an individual which may be treated as qualified mortgage relief distributions for any taxable year shall not exceed the excess (if any) of $25,000, over the aggregate amounts treated as qualified mortgage delinquency relief distributions received by such individual for all prior taxable years.

Defines such distributions as those made from an eligible retirement plan between the enactment of this Act and January 1, 2010, if: (1) the distribution is made during any 90-day period beginning on the date of any increase in the interest rate applicable to the acquisition indebtedness of the taxpayer's principal residence; and (2) taxpayer's adjusted gross income for the taxable year of such distribution does not exceed $114,000 ($166,000 in the case of a joint return).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Homeowners' Assistance Act of 
2007''.

SEC. 2. TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS FOR MORTGAGE 
              RELIEF.

    (a) In General.--Section 72(t) of the Internal Revenue Code of 1986 
shall not apply to any qualified mortgage relief distribution.
    (b) Aggregate Dollar Limitation.--
            (1) In general.--For purposes of this section, the 
        aggregate amount of distributions received by an individual 
        which may be treated as qualified mortgage relief distributions 
        for any taxable year shall not exceed the excess (if any) of--
                    (A) $25,000, over
                    (B) the aggregate amounts treated as qualified 
                mortgage relief distributions received by such 
                individual for all prior taxable years.
            (2) Treatment of plan distributions.--If a distribution to 
        an individual would (without regard to paragraph (1)) be a 
        qualified mortgage relief distribution, a plan shall not be 
        treated as violating any requirement of the Internal Revenue 
        Code of 1986 merely because the plan treats such distribution 
        as a qualified mortgage relief distribution, unless the 
        aggregate amount of such distributions from all plans 
        maintained by the employer (and any member of any controlled 
        group which includes the employer) to such individual exceeds 
        $25,000.
            (3) Controlled group.--For purposes of paragraph (2), the 
        term ``controlled group'' means any group treated as a single 
        employer under subsection (b), (c), (m), or (o) of section 414 
        of such Code.
    (c) Amount Distributed May Be Repaid.--
            (1) In general.--Any individual who receives a qualified 
        mortgage relief distribution may, at any time during the 5-year 
        period beginning on the day after the date on which such 
        distribution was received, make one or more contributions in an 
        aggregate amount not to exceed the amount of such distribution 
        to an eligible retirement plan of which such individual is a 
        beneficiary and to which a rollover contribution of such 
        distribution could be made under section 402(c), 403(a)(4), 
        403(b)(8), 408(d)(3), or 457(e)(16) of the Internal Revenue 
        Code of 1986, as the case may be.
            (2) Treatment of repayments of distributions from eligible 
        retirement plans other than iras.--For purposes of such Code, 
        if a contribution is made pursuant to paragraph (1) with 
        respect to a qualified mortgage relief distribution from an 
        eligible retirement plan other than an individual retirement 
        plan, then the taxpayer shall, to the extent of the amount of 
        the contribution, be treated as having received the qualified 
        mortgage relief distribution in an eligible rollover 
        distribution (as defined in section 402(c)(4) of such Code) and 
        as having transferred the amount to the eligible retirement 
        plan in a direct trustee to trustee transfer within 60 days of 
        the distribution.
            (3) Treatment of repayments for distributions from iras.--
        For purposes of such Code, if a contribution is made pursuant 
        to paragraph (1) with respect to a qualified mortgage relief 
        distribution from an individual retirement plan (as defined by 
        section 7701(a)(37) of such Code), then, to the extent of the 
        amount of the contribution, the qualified mortgage relief 
        distribution shall be treated as a distribution described in 
        section 408(d)(3) of such Code and as having been transferred 
        to the eligible retirement plan in a direct trustee to trustee 
        transfer within 60 days of the distribution.
    (d) Definitions.--For purposes of this section--
            (1) Qualified mortgage relief distribution.--Except as 
        provided in subsection (b), the term ``qualified mortgage 
        relief distribution'' means any distribution from an eligible 
        retirement plan made on or after the date of the enactment of 
        this Act and before January 1, 2010, if--
                    (A) such distribution is made during any 90-day 
                period beginning on the date of any increase which 
                occurs under the terms of the loan in the interest rate 
                applicable to acquisition indebtedness (as defined in 
                section 163(h)(3)(B) of the Internal Revenue Code of 
                1986, without regard to clause (ii) thereof) with 
                respect to the principal residence of the taxpayer, and
                    (B) the adjusted gross income (as defined in 
                section 62 of the such Code) of the taxpayer for the 
                taxable year of such distribution does not exceed 
                $114,000 ($166,000 in the case of a joint return under 
                section 6013 of such Code).
        For purposes of subparagraph (A), any increase in interest rate 
        which occurs after May 31, 2005, and before the date of the 
        enactment of this Act shall be treated as occurring on such 
        date of enactment.
            (2) Eligible retirement plan.--The term ``eligible 
        retirement plan'' shall have the meaning given such term by 
        section 402(c)(8)(B) of such Code.
            (3) Principal residence.--The term ``principal residence'' 
        has the same meaning as when used in section 121 of such Code.
    (e) Income Inclusion Spread Over 5 Year Period for Qualified 
Mortgage Relief Distributions.--
            (1) In general.--In the case of any qualified mortgage 
        relief distribution, unless the taxpayer elects not to have 
        this subsection apply for any taxable year, any amount required 
        to be included in gross income for such taxable year shall be 
        so included ratably over the 5-taxable year period beginning 
        with such taxable year.
            (2) Special rule.--For purposes of paragraph (1), rules 
        similar to the rules of subparagraph (E) of section 408A(d)(3) 
        of the Internal Revenue Code of 1986 shall apply.
    (f) Special Rules.--
            (1) Exemption of distributions from trustee to trustee 
        transfer and withholding rules.--For purposes of sections 
        401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 
        1986, qualified mortgage relief distributions shall not be 
        treated as eligible rollover distributions.
            (2) Qualified mortgage relief distributions treated as 
        meeting plan distribution requirements.--For purposes of such 
        Code, a qualified mortgage relief distribution shall be treated 
        as meeting the requirements of sections 401(k)(2)(B)(i), 
        403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) of such Code.
    (g) Provisions Relating to Plan Amendments.--
            (1) In general.--If this subsection applies to any 
        amendment to any plan or annuity contract, such plan or 
        contract shall be treated as being operated in accordance with 
        the terms of the plan during the period described in paragraph 
        (2)(B)(i).
            (2) Amendments to which subsection applies.--
                    (A) In general.--This subsection shall apply to any 
                amendment to any plan or annuity contract which is 
                made--
                            (i) pursuant to any amendment made by this 
                        section, or pursuant to any regulation issued 
                        by the Secretary of the Treasury or the 
                        Secretary of Labor under this section, and
                            (ii) on or before the last day of the first 
                        plan year beginning on or after January 1, 
                        2010, or such later date as the Secretary of 
                        the Treasury may prescribe.
                In the case of a governmental plan (as defined in 
                section 414(d) of the Internal Revenue Code of 1986), 
                clause (ii) shall be applied by substituting the date 
                which is 2 years after the date otherwise applied under 
                clause (ii).
                    (B) Conditions.--This subsection shall not apply to 
                any amendment unless--
                            (i) during the period--
                                    (I) beginning on the date the 
                                legislative or regulatory amendment 
                                described in subparagraph (A)(i) takes 
                                effect (or in the case of a plan or 
                                contract amendment not required by such 
                                legislative or regulatory amendment, 
                                the effective date specified by the 
                                plan), and
                                    (II) ending on the date described 
                                in subparagraph (A)(ii) (or, if 
                                earlier, the date the plan or contract 
                                amendment is adopted),
                        the plan or contract is operated as if such 
                        plan or contract amendment were in effect; and
                            (ii) such plan or contract amendment 
                        applies retroactively for such period.