Fannie Mae, Freddie Mac and Ginnie add new social bond initiatives

Three major players in the U.S. secondary mortgage market have recently taken more steps toward appealing to investors who are looking for environmental, social and governance bonds.

Government-sponsored enterprises Fannie Mae and Freddie Mac added disclosures for certain repooled securitizations on Monday. That move followed close on the heels of Ginnie Mae's introduction of a social label and framework for traditional single-family bonds last week.

The initiatives may create more of an impetus for mortgage lenders to extend credit to underserved populations like low-income, first-time or minority homebuyers, or those in regions that have housing challenges, such as an area that's been through a natural disaster.

The GSEs assign social bond labels based on scores that measure the extent to which mortgages address homeownership hurdles like the aforementioned. Ginnie bases its label on similar criteria.

The latest move by the government-sponsored enterprises specifically adds disclosures for mortgage-backed securities repooled in investments known as Megas at Fannie, Giants (Freddie) or Supers (containing uniform MBS.)

Monthly reports on Supers, Giants and Megas issued since Jan. 1, 2010 will include social disclosures starting with publication as of Dec. 6. The revision of Ginnie's prospectuses for traditional single-family MBS will be effective starting Oct. 1.

Ginnie's framework emphasizes not only mortgages that help targeted populations or advance affordable housing, but also green homes.

Freddie and Fannie also have an ESG focus that goes beyond social bonds.

Their past efforts also have extended beyond social impacts, and to loans with five or more units as well as those secured by one to four. Examples include sustainability bonds at Freddie Mac, and Fannie Mae's green securities secured by energy-efficient housing.