Huh? What's this? Defying Fed expectations, certainly, mortgage rates are spurning ZIRP doctrine which clearly states thou shalt not refinance at higher than 6%. FAIL!

Via WSJ:

The U.S. Federal Reserve's program to keep mortgage rates low by buying securities and Treasury bonds so far has been costly and seems to be having a fleeting impact.

An analysis of the timing of the Fed's purchases of mortgage-backed securities by J.P. Morgan Chase & Co. shows the Fed is "under water" on its portfolio by about 1%, and it would have to take about $5 billion in losses if it were to mark its portfolio to the market.

And Reuters' take:

NEW YORK (Reuters) - A dizzying rise in U.S. mortgage rates this week has left homeowners worried about the government's ability to revive the housing market as a means to economic recovery.

Higher mortgage rates could hinder a nascent rebound in housing this year, where cheaper loans and lower prices have enticed buyers to cut into the inventories of unsold homes.

Loan refinancings to take advantage of lower rates have also been key supports of the housing market in 2009, providing a rare bright spot for a market buffeted by rising defaults, foreclosures, and falling prices.

The level of interest rates is central to President Barack Obama's efforts to break the decline in housing, where prices which have fallen more than 30 percent since the 2006 peak are causing a vicious cycle of foreclosures. Housing is also seen as a driver of a recovery in the U.S. economy which is hanging in a delicate balance between growth and a deeper recession.

"The interest rate rise this week is very troubling for the housing market," said Ronald Temple, co-director of research at Lazard Asset Management in New York. "It raises the cost of purchasing a home at precisely the time when we have large excess supply of homes hitting the market."

Oh, but Joe Biden says the housing sector is stabilizing. If that were true, we have the Fed to thank for sabotaging that little effort.

Coincidentally, 30-year mortgages made the jump at the exact same time the Treasury market showed serious signs of destabilization and weakness. Not coincidentally, while America is engaged in this scam (no one to buy your debt? No problem! Buy your own! Thanks, Ben Bernanke!), the longer-term prospects are evaporating and markets across the board are demonstrating undeniable instability. And this is a surprise to no one except the Fed, of course.

Mortgage gurus HSH.com on the shocking "spasm" (move along now, nothing to see here, chillax...):

“Bond and mortgage markets spasmed this week, and the corresponding sharp rise in rates over a two-day period served as a reminder that even a battered private market markets can be a dangerous animal. It wasn’t completely clear what sparked the rout, but there was speculation that a combination of unclear goals in Federal Reserve quantitative easing programs, floods of new sovereign debt and shoddy treatment of GM bondholders all led to the selloff.”

“Yields on the influential 10-year Treasury bond had lifted by just over a half a percentage point in a few days’ time, rising from the low- to the upper-3% range and taking conforming fixed mortgage rates along for the ride. After standing at a familiar 5.03% on Tuesday, Conforming 30-year FRMs leapt to 5.29% on Wednesday and then 5.44% on Thursday before finally settling back some on Friday to 5.30%.”

Uh huh. I'm still not buying it. Someone is going to have to get real or this is going to blow up. I'll be in my crappy apartment adjusting my tin foil hat if anyone needs me...