Market updates and sector developments

Fannie Mae and Freddie Mac have unveiled a new iteration of their social scores, rebranding them as ‘Mission Index Scores’, which will serve as the basis for future social-labeled agency MBS. As part of the move, the GSEs have launched Single-Family Social Bond Frameworks and intend to begin disclosing new impact reporting metrics for investors.

Compared to the first Social Score iteration, the Mission Scores add three characteristics (affordable rental, borrowers residing in underserved markets and special purpose credit programme borrowers) and remove one characteristic (minority borrower). Additionally, many characteristics of the Mission Scores are subject to a lower 100% area-median income (AMI) cap than the original Social Scores, which had a 120% AMI cap. The aim is to further support underserved borrowers’ access to credit and affordable housing.

The Mission Index will begin to apply to pools issued by Fannie Mae beginning in March 2024 and for Freddie Mac beginning in June 2024. The enterprises expect to assign ‘social’ labels to single-family MBS meeting the Social Bond criteria beginning in June. The label will be applied to an MBS when its underlying pool exceeds a certain score in the Mission Index.  

The GSEs’ Single-Family Social Bond Framework is being rolled out in cooperation with the FHFA. Both Fannie and Freddie obtained second-party opinions from Sustainalytics, which acknowledge that the Social Bond Framework is credible and impactful, and aligns with the four core components of ICMA’s Social Bond Principles 2023.

The enterprises also plan to provide social MBS impact reporting annually beginning in 2025, which will help market participants understand the effects of the loans underlying their social MBS investment.