FHFA seeks input on issuing single-family social bonds

The Federal Housing Finance Agency today issued a request for input on Fannie Mae and Freddie Mac’s social bond policy. Fannie and Freddie both currently issue labeled multifamily social bonds, but neither issue labeled single-family social bonds. The RFI is intended to help FHFA understand the potential opportunities and risks in issuing single-family social bonds under the framework of environmental, social and governance securities. FHFA also wants input in defining the criteria and appropriate impact measures for 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,” said FHFA Director Sandra L. Thompson. “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, Fannie and Freddie began issuing single-family affordable bonds comprising loans from each enterprise’s affordable loan products. 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 and began publishing new single-family mortgage-backed securities disclosures based on this methodology. FHFA said that while these activities may be interpreted by some investors as social issuances, they were not developed by the enterprises as labeled, designated social bonds. Input is due by April 17. On March 28, FHFA will also host a public listening session​ for additional input.