drivel - I think you have your QEs mixed up. At the last meeting Big Ben confirmed that they'd start purchasing treasuries with new $$ since they ran out of maturing short term treasuries in operation twist. However - the QE3 mbs buying program continues unabated (and may be intensified). It calls for committing $40 B in new $$ and still reinvesting the interest and principal that it gets from its existing mbs portfolio - another $30 B or so, but that 'reinvestment' figure keeps getting bigger every month as the NEW mbs is purchased. The Fed is currently purchasing somewhere around $85 B in mbs per month and if rates tick up a bit such that refis fall off - well the new issuance mbs mkt shrinks and the Fed is basically purchasing EVERYTHING that is available to purchase. It has been reported that the FED is actually having a hard time finding enough mbs to purchase. They are distorting the mkt. Romney would call both the Fed and the Chinese - mkt manipulators --- of course that is their intent.
banks still have a huge problem with mortgages. really no buyers except the agencies. the agancies have standards that they are holding the banks to vis-a-vis credit score, loan to value, interest rate, etc.
they(wisely) still do not want to hold mortgages on their own books, so they have to play the only game in town.