Interesting that the fed is purchasing mortgage backed securities. First, the toxic MBS market caused by no doc loans caused a huge part of this mess. But hten, not willing to let a good crisis go to waste, the federal government instituted the big bank "bail out", which was really handing the banks free money to use to buy out the MBSs and then foreclose on them without risk to the banks themselves. Then the federal government by way of Fannie Mae, ended up holding the paper on about 80% of the residential housing market.
So then Bernanke starts talking about tapering off QE which signals to the consumer market that interest rates will start to rise. Have you wondered why there have been so many home refi commercials on the radio lately? The possibility of interest rates going up pushed consumers who still owned a home (or still believed they should) to run out and lock that OMG IT WILL NEVER BE THIS AWESOME AGAIN rate. Except now there is a personal indemnification clause in these mortgages too. See, in the past, when people still thought the housing market was bulletproof, if you stopped paying on the house the bank took it back and resold it on the open market. If you had less than 80% equity then you had Private Mortgage Insurance, which was never there to protect YOU, it is there for the lender. Thing is when the market went belly up the insurance companies did not have enough liquidity to pay all the claims. The loss in effect ended up being absorbed by the banks with federal (fake, printed, borrowed, choose one) money. But now the government owns the market, people are jumping back in, interest rates have been creeping up in anticipation of the end of QE and now there are more fresh MBSs available with the added security that if the homeowner is caught out again, the difference between the sale price and the amount owed on the property remains the buyer's responsibility. So now the MBS is a more secure investment than it used to be. This basically means that PMI you are paying is now just another bank fee, because YOU, not the bank, are responsible for any market losses. Nice, huh? Still trust your government?