A proposed bill circulating in the House of Representatives would waive early distribution penalties on qualified retirement plans if the money is used to buy foreclosed homes.

Sponsored by Rep. Bill Posey, R-Fla., the Housing Recovery Act of 2011 is expected to apply to distributions from Roth IRAs, 401(k)s and company pension plans.

The bill requires individual distributions to be used within 120 days for the purchase of a residence that has been in foreclosure for at least one year. Purchasers must agree to hold the property for at least two years in order to be exempt from withdrawal penalties.

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