The Federal Reserve purchased nearly $70 billion of GSE MBS during the first month of its special initiative to lower loan rates and help stabilize the residential finance market.

The New York Federal Reserve Bank started purchasing Fannie Mae, Freddie Mac and Ginnie Mae MBS on Jan. 2, buying $10.2 billion in agency MBS the first week.

By the mid-January, the 30-year mortgages had dropped below 5%, creating a surge in refinancing applications. But a sell off in the Treasury securities market has pushed mortgage rates up to 5.25% again.

The Fed succeeded in narrowing the spread between the 10-year Treasury rate and mortgage rates, according to Mahesh Swaminathan, a Credit Suisse mortgage strategist.

"The Fed's buying of mortgages is definitely a positive on the whole, but it doesn't guarantee lower mortgage rates if Treasury rates continue to sell off," he said. The New York Bank reported on Thursday that it purchased $16.8 billion in agency MBS from Jan.22 through Jan. 28.

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