Policymakers should focus on issues like improving the lack of new housing stock rather than criticizing the financial stability of Fannie Mae and Freddie Mac, says Don Layton, senior industry fellow at the Joint Center for Housing Studies of Harvard University.

In the “Politicization and the Flawed Narrative of Loose Credit,” Layton says critics of those government-sponsored entities (GSEs) use flawed arguments, draw inaccurate conclusions and ignore important data.

These GSEs show less risk to the country’s financial system than they have in years, he says, and have strengthened their credit quality by using mortgages without product features like interest-only periods and balloon payments. These features were identified as credit weaknesses in mortgages during the 2008 financial crisis. Other factors that should be considered include credit rating FICO scores, loan-to-value ratios and the value of credit risk transfers, in which GSE mortgages are sold to institutional investors.

Layton was the CEO of Freddie Mac from May 2012 until June 2019.

For more details of Layton’s research, read, “A Case Study of GSE Politicization: The Flawed Narrative of Loose Credit.”