Long-term Treasury rates have remained stable, the 10-year Treasury note in a band between 3.6 percent and 3.75 percent for a whole month. However, mortgages are beginning to "vibrate," trying to find an appropriate level as the Fed stops buying: in just the last week rates have moved between 4.875 percent and 5.125 percent.

Treasurys are getting buying support from the slow-motion chaos in Europe. Germany has at last refused to help to Greece, saying it’s an International Monetary Fund problem and not the European Union’s, thereby putting the rest of the "Club Med" dominoes on notice.

Long-term Treasury rates have remained stable, the 10-year Treasury note in a band between 3.6 percent and 3.75 percent for a whole month. However, mortgages are beginning to "vibrate," trying to find an appropriate level as the Fed stops buying: in just the last week rates have moved between 4.875 percent and 5.125 percent.

Treasurys are getting buying support from the slow-motion chaos in Europe. Germany has at last refused to help to Greece, saying it’s an International Monetary Fund problem and not the European Union’s, thereby putting the rest of the "Club Med" dominoes on notice.

Germany never has graded better than a "C" for playing well with others. France today expressed dismay at Germany’s IMF proposal. Although dismay is a French specialty, it is correct: If Europe cannot look after its own, "union" is a fantasy.

As so often during fracture of a collective effort, all members overestimate their individual advantage, Germany in the lead. Actual breakup — even the departure of Greece — would cascade cash to the only remaining safe-haven. The U.S. Believe it or not.

The Fed’s post-meeting statement that "economic activity continued to strengthen …" would get a poor reception in your average Main Street saloon. Improve, yeah, in places; but, "strengthen"? … Nah. If it were truly strengthening, why the exceptionally low rate for an extended period?

The Fed also hit the end game of its housing forecast. In November: "Activity in the housing sector has increased." December: "Some signs of improvement." January: No comment. This week: "Housing starts have been flat at a depressed level."

Every administration must generate happy-talk forecasting. However, Tuesday’s Timothy Geithner/Peter Orszag/Christina Romer official report to Congress was either the most honest ever, or if happy-spun we’re in more difficulty than the Fed will acknowledge.

We will not see 200,000 jobs created in a month until sometime in 2011; unemployment will still be 9 percent at the end of 2011, and 8 percent a year after that. Stranger than honesty, the report recites mini-policies but is void of real stuff — there’s nothing on what really ails the economy and inhibits recovery, or what to do.

With that backdrop, the Fed next week will stop buying mortgage-backed securities. …CONTINUED

Play the tape all the way back. The housing "Bubble Zones" began to deflate at the end of 2005. The wholesale bank run and credit collapse began in July 2007, and the Fed began to cut the overnight cost of money. Market rates, mortgages included, did not follow, as global cash instead ran to somebody’s — anybody’s — Treasury paper.

Early in 2008, mortgage rates rose to nearly 7 percent and many classes of mortgages became unobtainable — some for good (toxics), some for ill (jumbos, sensible underwriting). That credit drought pulled the housing collapse beyond the Bubble Zones before the recession really hit, post-Lehman, in fall 2008.

Incredibly to me, the Fed did nothing to support mortgage markets until it announced its MBS-buying intentions around Thanksgiving 2008, and did not begin to buy until January ’09. Yes, the Fed could argue that such dramatic action could not be taken until the precipice was clear to politicians.

The counter: No American recessions in the last 40 years ended until a deep drop in mortgage rates ignited housing. We still don’t have a deep drop.

The rate centerline during the Fed’s 2009 buys has been the same as 2002-03, and barely more than 1 percent below the 2004-08 average — and much of that benefit has been canceled by hysterical tightening of credit standards at Fannie and Freddie (mercifully, the Federal Housing Administration has held constant, standards the same since World War II, no easier during the bubble, no tighter now.)

The housing market has gradually fallen out from under the Fed’s support in the last year, demand flat at best versus increasing distressed inventory.

The utterly wacky, perverse good news: So far, perhaps due to diminished demand, perhaps because the Fed has not merely bought but removed altogether from the table $1.25 trillion in MBS … mortgage rates are holding. We’ll take that.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

***

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