The American Bankers Association today submitted remarks in action to the Federal Housing Finance Agency’s current ask for input on a single-family social bond policy for Fannie Mae and Freddie Mac, with the association offering factors to consider ought to the firm even more pursue the policy. In 2021, the 2 government-sponsored business started multi-family inexpensive bonds under the structure of ecological, social and governance securities. ABA kept in mind in its remark that while ESG investing has actually existed in various types for a long period of time, the subject stays questionable. “Therefore, we believe it is important that FHFA proceed cautiously when considering developing any single-family social bond program,” the association stated.
Pointing to the responses to the firm’s loan-level rates modifications, ABA stated that any government-directed efforts to accomplish social results can be questionable, particularly if they are not well articulated or well comprehended. “A single-family social bond program could elicit the same (or greater) levels of controversy unless it is developed transparently and with broad public input that is provided through notice and comment, as well as public hearings,” the association stated. “We would encourage FHFA to undertake a rigorous development and vetting process not unlike the effort that went into the creation of the uniform mortgage-backed security (UMBS).”
ABA likewise kept in mind that the payments gotten by the GSEs from the sale of UMBS develop a broad, steady and liquid secondary market that greatly broadens the schedule of home mortgage credit for low- and moderate-income customers. “Social bonds could undermine the functioning of the secondary market if they incentivize the GSEs or other market participants to purchase or price certain loans over others based upon their attractiveness for a social bond,” the association stated. “Disruption to the fungibility of UMBS or to the functioning of the broader ‘to be announced’ market would undermine the entire secondary mortgage market. That must be avoided.”
