Government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac announced this week the release of their “Mission Index,” updating or expanding their single-family social bond framework to better communicate the goals of the index to stakeholders and investors.
The GSEs issued separate announcements and a joint statement. Freddie Mac updated its single-family social bond framework which includes refinements to its mortgage-backed securities (MBS) disclosures, “designed to further support underserved borrowers’ access to credit and affordable housing as part of the company’s mission and goals,” the announcement said.
Fannie Mae announced the launch of its single-family social bond framework which included updates to its disclosures for single-family MBS, which is “aimed to further support access to credit and affordable housing as part of its mission and goals” according to its announcement.
The GSEs also released a joint blog post authored by Barbara Pak, vice president of single-family securitization at Freddie Mac, and Nick Spirie, vice president of capital markets – single-family products at Fannie Mae, explaining the rebranding of its Single-Family Social Index, originally launched in 2022.
“[T]he Single-Family Social Index [is] a creative disclosure solution that provides insights into the mission-oriented lending activities underlying our mortgage-backed securities (MBS),” the joint post said. “Since then, we collected market feedback, refined the methodology, and are now introducing updates to the disclosure, including a refreshed name, the Mission Index.”
The GSEs also laid the groundwork for their other major development consisting of aligned single-family social bond programs, the pair said.
“Our focus on our mission and duty to serve goals through the Mission Index is intended to promote access to financing for the communities we were chartered to serve,” they explained. “The new name, the ‘Mission Index,’ reflects direct feedback from investors, highlights that this is an Enterprise-specific disclosure, and helps investors better understand how our mission activities support U.S. housing.”
The “Mission Criteria Share (MCS)” and “Mission Density Score (MDS)” will be the new names for corresponding pool-level disclosures, the post said.
The Mission Index intends to balance three primary factors based on industry feedback, the leaders said.
These will allow “investors to identify MBS with high concentrations of loans that align with the Enterprises’ mission objectives;” seeking to “preserve the liquidity and efficiency of the single-family UMBS to-be-announced (TBA) mortgage market for Fannie Mae and Freddie Mac issued securities;” and aiming to “mitigate potential harm to borrower privacy by aggregating potentially sensitive data elements about a loan into rolled-up metrics.”
The GSEs’ single-family social bond programs will also “offer investors the ability to invest in single-family MBS featuring high concentrations of loans made consistent with our mission” as viewed through the Mission Index. The GSEs say that investor demand for these MBS “may result in lenders focusing more on lending to these populations, with loans underwritten to the Enterprises’ strong credit standards.”
The Mission Index renaming will take effect in February, with both GSEs rolling out their updates in cooperation with the Federal Housing Finance Agency (FHFA) according to the announcements. The Mission Index name will apply to all pools for Fannie Mae beginning with March 2024 issuances, while they will begin applying to all Freddie Mac pools in June 2024.
The GSEs also released additional details in additional documents including about the social bond framework, a second-party opinion, and the Mission Index’s methodology.
