Freddie Mac, Fannie Mae revamp social MBS framework to boost affordable housing

New mission index to drive capital toward underserved communities

Freddie Mac, Fannie Mae revamp social MBS framework to boost affordable housing

Freddie Mac and Fannie Mae have updated their single-family social mortgage-backed securities (MBS) and corporate debt bonds framework, introducing a series of changes to enhance access to affordable housing and credit for underserved communities.

As part of the updates, both Freddie Mac and Fannie Mae will rename their existing social index as the “Mission Index” in February 2024, with updates to the formulation scheduled for May 2024 and February 2024, respectively.

This renamed index will play a crucial role in determining the eligibility of mortgage collateral to be pooled, issued, and labeled as “Social MBS.”

The reformulated Mission Index will apply to pools issued by Freddie Mac starting in June 2024 and Fannie Mae beginning in March 2024. The label “Social MBS” will be applied to an MBS whose underlying pool exceeds a certain score in the Mission Index, starting with June 2024 issuances for Freddie Mac.

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“By providing investors with greater insight into the mission-oriented lending activities underlying our mortgage-backed securities through our Mission Index disclosures, more capital may be allocated in support of affordable housing so that over time more people have better access to credit,” Devang Doshi, Fannie Mae senior vice president capital markets, said in a statement.

“Freddie Mac puts its affordable housing finance mission at the center of its work, and the new social bond framework reflects that emphasis,” said Barbara Pak, head of single-family securitization at Freddie Mac. “The framework is an evolution of our effort to provide MBS investors with actionable information and mission-driven investment opportunities. By helping investors meet their socially responsible investing goals, we’re better positioned to make home possible for underserved borrowers across the country.”

Sustainalytics, a ratings and data firm, provided a second-party opinion affirming the framework’s credibility, impact, and alignment with the International Capital Market Association’s Social Bond Principles 2023. Both enterprises plan to begin annual Social MBS impact reporting in 2025, offering market participants insights into the effects of loans underlying their Social MBS investments.

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