The Federal Housing Finance Agency (FHFA) is seeking feedback on developing a social bond policy for Fannie Mae and Freddie Mac.
Currently, Fannie Mae and Freddie Mac (the enterprises) issue labeled multifamily social bonds, but they do not issue labeled single-family social bonds.
The FHFA’s request for input (RFI) will help FHFA understand the opportunities and potential risks associated with the issuance of single-family social bonds under the framework of Environmental, Social, and Governance (ESG) securities.
Further, FHFA is seeking input in defining the criteria and appropriate impact measures for enterprise-labeled single-family social bonds.
“FHFA has closely monitored the continued emergence of ESG securities and the potential for social bonds to bring more liquidity and capital to the market,” FHFA Director Sandra Thompson said. “As we evaluate responses from this RFI, FHFA will also look at ways that social bonds could increase liquidity and support for underserved borrowers and communities.”
In 2021, both of these enterprises began issuing single-family affordable bonds that are comprised of loans originating under each enterprise’s affordable loan products. But they recently adopted the Social Index, a methodology for measuring the degree to which various types of lending activity are supported in a given pool. The Social Index disclosures have facilitated the issuance of “High Social Index” pools.
While these activities may be seen by some investors as social issuances, they were not developed as labeled, designated social bonds. Through this RFI, FHFA seeks to inform future actions by the enterprises to develop and issue such social bonds.
On March 28, FHFA will also host a public listening session to allow for additional input. Further, interested parties can provide written input, feedback, and information on all aspects of this RFI by April 17. Comments may be submitted via FHFA’s website under “Social Bonds” or mailed to the Federal Housing Finance Agency, Office of Fair Lending Oversight, 400 7th Street, S.W., Washington, DC 20219.