Fannie Mae preps first social bond backed by affordable housing loans
Fannie Mae is lining up a debut US$315m social bond offering backed by loans on multi-family properties that provide affordable housing for low-to-moderate income households,
The deal, Fannie Mae GeMS Series 2021-M1S, is being led by Morgan Stanley and is expected to price this week.
The collateral consists of 26 loans secured against properties in California, Florida and Texas that provide affordable housing and meet the social bond component of the agency's Sustainable Bond Framework, which was published in November last year.
The agency's framework allows for the issuance of sustainable mortgage-backed securities classified either as green, social, or sustainable.
Fannie Mae has already issued heavily in the green bond space, tied to energy efficient buildings. It issued US$75bn of green multi-family mortgage backed securities from 2012-2019, and last year priced its first green bond deal backed by newly constructed, energy efficient single-family homes.
But this is its first offering under the new social bond criteria.
The social criteria in its framework include objectives such as enabling the financing of affordable housing, providing capital to under served groups, and supporting financing for vulnerable groups such as those impacted by natural disasters or global pandemics.
The agency notes on its website that it provided US$30.5bn of financing for affordable rental housing for low-to-extremely low income renters in 2019.
Fannie Mae's new US$314.78m offering consists of a US$33.5m "A-1" tranche with a six-year weighted average life, and a US$281.28m "A-2" tranche with a 9.62-year WAL.
Morgan Stanley was also a sole underwriter on a debut social bond offering from Freddie Mac in September last year, which repackaged Freddie's participation notes in a US$141m pool of multi-family loans originated by IMPACT Community Capital, a San Francisco-based investment manager that invests in underserved communities.
Co-managers on the Fannie deal are BMO Capital Markets, JP Morgan and Ramirez & Co.