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9 Journal CAUSES OF MORTGAGE CREDIT TIGHTENING As the economic impact of the pandemic continues, one of the biggest issues to emerge in housing finance is the availability of mortgages. In a paper by former Freddie Mac CEO Don Layton, he discusses the implication that somehow much or even all of the tightening is illegitimate, a failure of government policy; that it should be largely if not completely avoidable with the right government actions; and that those actions should not require the kind of subsidies we are seeing for small business or specific industries, like the airlines. Layton's paper, entitled "America's Housing Finance System in the Pandemic: e Causes and Policy Implications of Credit Tightening," examines how mortgages get made in 21st-century America, who sets the credit standards, why those standards are not fully immune to economic conditions. Layton reaches three conclusions: 1. e mortgage credit tightening we are seeing is much less of an issue than what was encountered in the prior financial crisis. 2. It is reasonable and appropriate that there should be tightening to a modest degree, even with the best possible government policy, as risks have gone up in the current economic environment. 3. e tightening we are seeing is overwhelmingly a byproduct of the private sector, as it performs its major role in housing finance, behaving as one would expect in an economic downturn—and it would be even worse if the government played a lesser role than it currently does. "However, also exacerbating the tightening, and probably in a significant way, is the unintended consequence of the generous mortgage forbearance program established by the CARES Act in late March," Layton said. "is is because it applies not only to then-outstanding government-supported mortgage loans, for which the forbearance program was originally designed but to newly-made ones as well. is is explored in some depth and is the cause of significant friction between the mortgage industry and the government mortgage agencies of Freddie Mac, Fannie Mae, and the Federal Housing Administration."