Source: Fannie Mae
Fannie Mae’s and Freddie Mac’s (the Enterprises) Mission Index disclosures provide insights into mission-oriented lending activities underlying our Single-Family mortgage-backed securities (MBS) — helping meet specific portfolio needs and informing investment strategy. The disclosure was designed in response to investors’ increased interest in allocating capital to support affordable housing and provide access to credit for underserved borrowers and markets. Since the first version of the Mission Index was introduced two years ago, it has evolved based on investor feedback and is now the foundation of the Enterprises’ Single-Family Social Bond programs. We’ve also introduced a new disclosure supplement, the Mission Index Criteria Attribution (MICA), to further support investors in their impact analysis.
Our Mission Through Disclosures
The Enterprises support liquidity, stability, and affordability in the U.S. housing finance market. We work especially hard to ensure that includes support for mortgage credit to moderate- and low-income families and underserved areas. The Mission Index helps to highlight these activities. In summary, it’s a disclosure designed as two aggregate measures per MBS pool. The first measure helps investors understand how many loans in a pool finance a property to borrowers meeting certain income, borrower, and property dimensions. The second measure illustrates how many of those loans meet multiple mission criteria. These measures are aggregated by design to minimize disruption to Uniform Mortgage-Backed Securities (UMBS) in the “to be announced” (TBA) market and to deliver transparency to investors while protecting borrower privacy.
Market Reception
The Mission Index has been well received by both impact-focused investors and by value-focused investors. That is because, in addition to providing more information on the social characteristics of the borrowers underlying a pool, many of the criteria that comprise the Mission Index are historically correlated with slower prepayments, or call protection. As a result, both impact and non-impact investors alike have expressed interest in these new disclosures. Some of this interest has been expressed through pay-ups, meaning investors find value in MBS pools with high Mission Index scores and are willing to pay more for them than the typical TBA security. This demand, and the pay-ups received by lenders who originate these loans, are designed to help incentivize more mission-oriented mortgage financing.
Single-Family Social Bonds
Our Single-Family Social Bonds, or MBS, launched in the first half of this year, are designed to satisfy international standards and are bolstered by independent second party opinions. And the Mission Index is the foundation of the program. MBS pools with 100% of their loans having at least one mission-focused attribute and an average of at least two of the three high-level attributes (i.e., income, borrower, or property) per loan now receive a Social Bond label. When the Enterprises pool whole loans purchased from lenders that meet the criteria for our Single-Family Social Bond labels into an MBS and sell that MBS with a pay-up, the programs are designed to support more mission lending. Specifically, the Enterprises plan to allocate incremental funds they receive from pay-ups for Single-Family Social MBS to incent lenders to prioritize these types of loans, while any surplus revenue are expected to support mission lending programs, such as our Duty to Serve plans.
Bolstering Impact Analysis
Recently, Fannie Mae published a MICA disclosure supplement and Freddie Mac expects to release its MICA soon. These supplements are designed with the impact-focused investor in mind and seek to help respond to more detailed questions about how an investor’s portfolio supports mission lending.
The MICA provides cohort-level information about all MBS pools issued between January 2010 and February 2024 for Fannie Mae and between January 2010 and May 2024 for Freddie Mac under the original Mission Index Version 1. The MICA tells investors how common each attribute is among borrowers in securities issued by the Enterprises, with cohorts divided by issuance quarter, pool type, and the average number of mission-focused attributes for loans in the pool. This can provide valuable information about the types of borrowers receiving loans ultimately pooled into Enterprise MBS.
What’s Next?
Market feedback is key to the success of our programs. We’re excited to hear from investors on v1.0 of the MICA as we prepare to launch v1.1 in 2025, which will cover bonds issued under v1.1 of the Mission Index.
We’re also focused on creating our first impact reports for our Single-Family Social Bond programs, helping investors to see the effectiveness of the money they are putting to work to support mission-oriented lending.
To further aid in analysis, later this quarter we plan to update the Social Indicator disclosure for Fannie Megas, Freddie Giants, and Fannie and Freddie Supers to be disclosed as Yes if all the underlying security collateral have a Social Indicator of Yes.
We look forward to continuing to use this disclosure to work with lenders and investors to serve the needs of households across the country.
Learn More
Dive into the Mission Index and new MICA Resources – including Fannie Mae’s excel-based tool where investors can load their portfolios to receive an estimate of impact.
Review our Single-Family Social Bonds, including eligibility, disclosures, and expected impact reporting.
The information contained in this blog post and in the documents that may be accessed through this blog post is provided for your general information only and speaks only as of the date of those documents. Numerous assumptions were used in preparing the information, which may or may not be reflected herein. As such, no assurance can be given as to the information’s accuracy, appropriateness or completeness in any particular context. The information could be out of date and no longer accurate. Freddie Mac and Fannie Mae undertake no obligation, and disclaim any duty, to update any of the information in those documents. Opinions contained in this blog post are those of Freddie Mac and Fannie Mae as of the date of this blog post and are subject to change without notice.
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