Freddie Mac preparing to launch new type of multifamily mortgage bond

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Freddie Mac plans next week to market its first offering of multifamily sustainability bonds in a move aimed at both furthering its affordable housing mission and addressing a broader capital markets trend.

The projected deal size is $600 million, and the transaction will be part of Freddie's K-deal program. The sustainability bonds in this transaction and those Freddie Mac issues in the future through its multifamily program will be labeled K-SG.

Sustainability bonds, as defined by the International Capital Market Association, finance or refinance a mixture of green and social projects.

Revenue from sales of these Freddie bonds will be used to finance properties that provide affordable housing to families with either low or moderate incomes, which may be located in areas that "further economic opportunity" for residents. They may also finance projects aimed at reducing environmental impact.

"We've long had a focus on affordable and workforce properties and a consistent track record of over 85% of the units we finance being affordable to residents making 100% or less of the area median income," Robert Koontz, head of capital markets for Freddie Mac's multifamily division, said in a press release.

"These offerings further demonstrate our strong commitment to promoting sustainable communities through affordable housing," he added.

Green, social and sustainability bonds have each been gaining more traction in the market in recent years. The latter two categories have built more momentum due to the pandemic’s spread, according to a recent report by Standard & Poor's, which projected that social bonds will be the fastest growing part of the sustainable debt market in 2020.

Freddie Mac's multifamily division brought its first offering of social bonds to market in early September, and it launched its first offering of green bonds last year.

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Multifamily Secondary market Freddie Mac GSEs Green bonds Affordable housing Capital markets Originations