Did you hear? Mortgage rates are surging. That should be no surprise. All we had to do was look at the sharp sell off in US treasuries and you know that mortgage rates would follow suit. The 30 year fixed rate mortgage rate jumped to 5.29%, up from 4.91% just a week ago. On April 2nd the rate was 4.78%.

Just to give you an example in real dollar terms, let's take a $200,000 30 year fixed mortgage at 5.29%. Your monthly payment would be $1109.37 and your 30 payments would be $399,372.25. At 4.91% your monthly payment would be 1062.67 and your 30 payments would be $382,560. So in real dollar terms your cost has risen $16,812.00. In addition lenders are charging 0.7% in fees and points, unchanged from the previous week.

According to a report today in The Wall Street Journal [subscription required], Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) -- those twin titans of mortgage mayhem -- are planning to dish out $210 million worth of retention bonuses over the next 18 months. James Lockhart, director of the Federal Housing Finance Agency, explained that $51 million in payouts were distributed in late 2008, with the rest of the bonuses to be disbursed through 2009 and into early 2010.

The news is already raising politicians' ire, since Fannie and Freddie are staying afloat only through the grace of government bailouts. The two lenders reported combined losses of roughly $108 billion in 2008, says the Journal, yet 80% of Freddie's employees and 61% of Fannie's payroll will score retention bonuses based on this bleak operating performance.

There is an old saying: "never fight the Fed." If you had been short this bond market, you probably could be wiped out in one afternoon. When the Federal Reserve made its announcement a short time ago that they were buying long term securities the futures on the long bond jumped 4.25 basis points, or more that $4000.00 on just one contract. If you were long say 10 contracts you would be sitting on a $40,000 profit this afternoon.

I lump these zombies -- our first zombies -- together because everyone else does.

You and I are now the proud owner of these lifeless monsters, which have hundreds of billions of dollars in obligations on mortgages of declining quality.

What's more, for political reasons, their future will not be resolved for several years.

True shareholder value: zero

Michael Shulman is a contributor to OptionsZone.com.

Just change the names to Freddie and the US Treasury. Freddie is broke again. and wants another $30 billion from the US Treasury."Look I only lost $23 billion this time." From what has occurred in the past ,this is a sure bet.

This port was written by Minyanville contributor Minyan Peter.

In 2008, the average stock on the S&P 500 lost 38.5%. John Paulson, no relation to the former Treasury Secretary who is famous for making billions shorting sub prime mortgages in 2007, made almost exactly the same percentage increase as the S&P 500 lost. So in some sense, if you're wondering what happened to your money, ask John. He's got it.

Exactly how well did Paulson do and how did he do it? Paulson Advantage Plus, his largest fund with $7 billion in assets, returned 37.6% net of fees for 2008 -- this means that his pre-fee returns probably topped 40%. Paulson again bet right about the collapse of financial institutions. In early 2008, Paulson shorted Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) -- betting that they'd become insolvent or need to raise additional capital that would dilute shareholders.

Last Friday the Fed announced a $200 billion dollar program for buying toxic assets from banks to help them stay afloat. Yesterday the New York Federal Reserve Bank started a new $500 billion dollar program for buying toxic securities from Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM)

Since Friday the yield on 30 year agency mortgage securities dropped from 208 basis points over Treasuries down to 190 basis points. This has had the effect of lowering mortgage rates. The rate on a 30 year fixed mortgage has dropped to 5.3% from 6% last November.

The Fed is using four firms to conduct these transactions. They are: BlackRock (NYSE: BLK), Goldman Sachs (NYSE: GS), Pimco and Wellington Management.

As was stated previously, the Fed has not disclosed the details of any of these repurchase programs. They are saying that they will be doing this "as the need arises."

A dramatic effect of this new Fed action is the sharp drop in US Treasuries, which today are down another 217 basis points on the 30 year March futures contract. Since last Wednesday the March 30 year bond futures contract has dropped from 141 down to 133 for a drop of about 800 basis points or $8,000.

I guess we can assume from all of this that Freddie Mac, Fannie Mae and the banks are in much deeper trouble than the Fed led us to believe last November. The Fed is not calling these bailouts any longer. They are just going ahead with these massive programs, programs that, by and large, investors and the public are not aware of.

What are your thoughts on these programs?