Also, a 1st deed is the first claim to your house. Your mortgage company holds a 1st deed. If you take out a HELOC, that lender would hold a 2nd deed of trust. They are second in line to be paid if you default or go into foreclosure; thus, they have a higher risk, charge more interest. And the companies selling the income stream to these 2nd deeds of trust pay a much higher yield, like 10% – 12%.
Also, be careful if you are in any pension fund or money market fund or bond fund that holds any GSEs. Divest yourself. Fannie Mae and Freddie Mac, and the other GSEs are highly leveraged in housing, and when the bubble bursts, they will default on their payments. Fannie is already under federal regulatory scrutiny, and have to revise their income many years back. Most Americans are exposed to this, and don’t even know it. I bet the city pension funds hold this in a large sum. They’re all chasing those high yields, and there is a false sense of security in holding GSE instruments.