 Now, a second mortgage is when you take a fresh loan out to take money out of your house. The problem is that this effectively turns a house into a credit card. In fact, one that is government subsidized by Freddie Mac. It does two things. It drives house prices even higher because a credit card is worth more than frozen equity. Worse, it encourages people to drain every last dime out of their house. That leaves them right on the edge of default.