Easy Home Equity Loan

If a bank is having trouble with their asset column, why doesn’t a bank just issue 2 year bonds to borrow home equity from property owners at a decent interest rate? In other words, if a property owner has bad credit and does not qualify for a loan, why doesn’t a bank just give the property owner a 2 year bond (similar to a cd) at a 2 year cd interest rate and temporarily transfer the property owners equity into the asset column of the bank? The bank would then have additional assets in the asset column (to balance) and the property owner would get an interest rate on their home equity? (The amount borrowed by the bank would be only a fraction of the property owners home equity which would be insured only to 100,000, in agreement during the 2 year period that the homeowner would agree not to sale the property, pay taxes, etc. There could possibly even be an option to have the interest rate on return set to slowly cancel out some of the property owners personal debt. Foreign banks could do this to slow the rate of loss by shifting the time, similar to operation twist, but instead of using treasuries you would create a new bond and "twist" home equity.)

I am very new to banking concepts, does this form of bond already exist?
Thanks JoeyV, I need to make some mistakes now, I’m still new to this.
1) Yes, that’s where the "twist" would come in, in terms of the bond. The bank would issue a special kind of bond that the property owner can basically sell back to the bank (its in reverse, of course the interest rate will be that of a cd based upon the amount of equity agreed upon in the transaction).
2) This new type of bond could also be a special kind of deed that is made that shows temporary joint ownership during that period, with certain limitations in the contract. The bank can only use the equity of the property as a security. This could be made into a piece of paper with a notary seal of some sort and a few signatures on it.
3) The bank would actually temporarily be joint owner of the property (in terms of equity). It would be preferably best due to this if the property owner was preferably sub-prime, as the property owner would be unable to make a loan from that particular bank for the duration of the
…duration of the bond (due to a conflict of interest). I don’t know if this would work, but during the transaction, the money would actually be rotated from nothing in the asset column to a deposit in the liability column, insured, and back into the asset column to loan… all in terms of numbers, from nothing. (of course the real value being in the property and other loans made, not to mention other investments, r/mbs etc).
4) Well the "twist" in operation twist seems to me to be a twisting of the actual structure of the previous QE. In QE 1, 2 American banks were unable to make loans due to the credit crisis, it seemed they couldn’t make money off of federal bonds made from nothing unless they made sub-prime loans. So in terms of actual assets the banks had to hold properties (usually acquired through subprime lending) in the asset column in order to balance it, which lead to the mortgage crisis. In QE 1, 2 it seemed they simply took the money made out of nothing that American bank
…that American banks weren’t using, called the it a stimulus, then dropped this package of money made out of nothing on foreign banks for assistance. (I don’t know how it all exactly works yet, but I think after it was all over the properties from failed banks were just rebundled up and sold through investment banks.)
4) So it seems to me, in QE 3, the "twist" is that instead of unloading money made out of nothing on foreign banks, they shuffle the treasuries and simply twist the yield curve in terms of interest rates, in terms of time.
5) It seems if there is real value in home equity in failing countries, and the banks and property owners are not making money off it, it would kind of make sense to twist time and utilize it. In terms of failing countries though, it kind of sounds more like something the World Bank might do, that in providing interest on owned equity to those countries they provide base money for the people to buy basic supplies, meanwhile reloaning the money in the
…the money in the countries equity back to them in order to give property value, build and mobilize infrastructure.

I really appreciate your reply, have to do more research on it, the idea just came to me off the top of my head, so its nice to have some imput on it.

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OK, so please read this clarification if you are going to answer (because I can already anticipate the answers and it will not be what I’m looking for if you don’t read this). This is not a 401K loan I am talking about that you get from through your employer (so please don’t go down that path). Also please don’t suggest a home equity loan (the equity in our home is too low for that). I am talking about going through some type of financial institute and having them give me a loan using the IRA as collateral (and obviously taking into consideration the income we are bringing in and credit rating). I am simply trying to find a way to eliminate some credit card debt at a lower interest rate. If that’s not achievable then I will just keep paying off the cards as I am, by making additional payments on each. Thanks in advance.
Thanks for the quick responses guys. I should have also mentioned I was not looking to take a distribution and pay the tax penalties, but the initial answers seem to be on track with what I was thinking.
One of the reason I love Yahoo answers is that I can use the info provided by responders and then use that to google more info. I just googled tax violations thanks to the first answer and this is what I found (which sounds like it’s my solution)….

1
Call the 401k plan administrator for the company you currently work for. Ask whether it will allow you to roll you IRA into the 401k. While this is not the typical rollover discussed in a financial forum, the IRS does allow this and most administrators will agree. Request any paperwork you need from your plan administrator.

2
Call your IRA administrator and request a distribution form. An IRA rollover–regardless of what direction it is moving in–takes a distribution of assets from one account and has 60 days from the date of liquidation to return the assets in kind (cash) into another qualified plan–in this case your 401k.

3
Fill out all paperwork obtained, sign it and submit.

4
Deposit the IRA distribution check into your 401k p

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We bought a new home 3 1/2 years ago for 260,000 dollars and improved it in many ways. We have significant equity in this home; we owe just 113,000 dollars on a 30 year conventional (fixed) mortgage at 6.25 percent. My wife and I have credit scores of 750-760 depending upon the bureau asked. Aside from our home loan (113k), we have no debt whatsoever. My wife & I are both teachers.

About six weeks ago, we decided to refinance the home at a much lower interest rate and pull out 15,000 dollars equity. Everything was going fine until, about three weeks later, I decided to relocate for a better-paying job out-of-state. Because property values have declined in my community, we chose to rent the home for 1,500 per month with the goal of selling it after a year or so when the housing market improves. The home will be rented tomorrow.

Unfortunately, the appraiser somehow got the idea that we were selling our home, and our bank initially declined to refinance because of this. When I explained the situation to my loan officer, she said they’d have to “start the process over again” and that we’d pay higher fees and have a higher interest rate if approved.

So I have a couple of questions.

First, how long is this approval process going to take on average? Will it take another month?

Second, what is the possibility of getting a second mortgage to buy an inexpensive home where I am now? In today’s market situation, is that difficult to accomplish?
Our income isn’t very high because my wife chooses to only work part-time these days and spend more time with the kids. We generally have a 55-60K income. We had planned on initially renting in our new community, which is a rural area, and then (after a year or so), selling our home and purchasing with mostly cash. But the rental market is outrageous due to the military base I think. It’s much cheaper to buy: a fairly nice home (15 years old) rents for 17-800, but can be purchased for 150k. So rents are high, but prices are pretty low.

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I am looking into getting my first home and barely meeting the credit requirements so I am thinking I am going to get a FAIR interest rate with my down payment. I know the market is crap but still not expecting a miracle rate. So my question is this: In regards to auto loans, because the car DEPRECIATES over time, getting a sucky interest rate and planning on getting out of the loan later is not good because the interest is still owed on the high interest rate… but with a home, what should I be considering when getting a FAIR interest rate and will have a better score in the next 1-2 years paying on time? A house APPRECIATES so I won’t be rolling that interest from a higher rate on a house over if I get a new house in 3 years, right?

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can anyone anwser ANY of these?

1. Real Property is NOT: (Points: 10)
attached to the ground
often mortgaged
taxed
capable of being moved

2. When a large value item or asset is sold voluntarily, it could be called what? (Points: 10)
foreclosed
repossessed
liquidated
auctioned

3. If you break an automobile or apartment rental lease before the contract expires, you could be subject to what? (Points: 10)
prepayment penalty
early termination penalty
finances charges
higher interest rates

4. When you begin paying a 30-year loan, what part of the loan are you paying first? (Points: 10)
equity
interest
principal
assets

5. If you don’t own your residence, what kind of insurance do you need? (Points: 10)
Homeowners insurance
Supplemental insurance
Renters insurance
Private Mortgage insurance

6. What are expenses like telephone, electricity and natural gas called? (Points: 10)
assessment expenses
utility expenses
luxuries
budget items

7. Insurance approval and evidence of coverage is required to get a mortgage. (Points: 10)
True
False

8. When you rent your residence, taxes are paid as part of your rent payment. (Points: 10)
True
False

9. When you pay finance charges, or interest payments on your first home the amount is deducted from your federal income tax. (Points: 10)
True
False

10. What are good reasons for buying/mortgaging a home? (Points: 10)
to build equity as savings
you expect to reside in the same area for a long time
your credit is established and you can get a very low interest rate
your income is high enough to claim a deduction on your income tax
all of the above

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we are debating because of our situation whether to take this loan or not. we have applied elsewhere, and this is all we have been offered.
we are 30k in debt want to consolidate and lower our interest rate. our payments in total average 1100 a month and interest averages 15-21%
the loan presented to us, is 50K , 5% interest only ( of course we would pay down on principal) 25 years ( our intent is pay off all within 10 years.) the difference of the 30K would be available to us like an a line of equity. Our concern is that shortly I will be without of a job because they are closing down in 4 months and we have a mortgage. We plan on selling our house but this will be a short sale because the value is less than we owe by 20k.this was not due to our home loan we had fixed, but our area was the highest hit in foreclosure thus the value decrease! please no rude comments we are extremely stressed.
the reason we are taking 50K is not because we need the additional amount but to help our credit. If we take 30k it looks as though we maxzed out on a 30 k credit card, whereas if we took 50K (which is a line of credit) then it looks better. If I am incorrect please tell me.
MORE IMPORTANTLY TOTAL CLOSING FEES AND BROKERAGE FEES 6,500!
this is in no way part of the home loan, its a personal line of credit.

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I contacted a mortgage broker I have used before about doing a cash out re-finance on my home combining the 1st and 2nd mortgage and getting some cash. He gave me all the details and sent over a good faith estimate and I provided all of the information in order to proceed. I later find out I cannot do a re-finance because our house is currently for sale. Therefore, I opt to go with a HELOC to refinance the existing 2nd mortgage. He quoted me a rate of prime and said it appears we are below 80% LTV and should have some additional equity to borrow against if we would like. The appraisal came back at 9K…far lower than the 8K appraisal I have done a few month earlier (that he would not accept) in order to remove my PMI. Coincidentally, the 9K put us right at 80% LTV and he proceeded to tell me the rate is no longer prime…it is now a 5% floor rate. I told him I was not interested…since I knew I could get a better deal (and I did with another bank). When I told him I was not interested and stated the appraisal seems way off…he said I still owe for the appraisal. Am I still obligated to pay this? Given my situation it seems like they purposely tried to get my appraisal to come in where I would not be under 80% LTV. From the recent sales in my area I know the 9K is low. Regardless, I was not happy with the entire process and was not informed of anything until after the appraisal. If he would have told me that it did not look like we would be under 80% LTV then he should have said so…instead of SURPRISE…you are not getting prime…the best we can do is a 5% floor. Another thing I should mention, I did not sign a Good Faith Estimate for the HELOC application…since I was originally applying for conventional loan. I only signed a Good Faith for the conventional loan.
What exactly did I sign that obligates me to pay?

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