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Knowledge

How Privatizing Fannie Mae and Freddie Mac Could Affect Mortgage Note Investing

Current Market Dynamics

Fannie Mae and Freddie Mac support around 70% of U.S. mortgages, making them dominant players in the mortgage market. The GSEs currently back roughly $7 trillion in mortgages and are considered too important to housing market stability, with "any major disruption [potentially] severely impacting housing affordability and market access"

Key Impacts on Mortgage Note Investing

1. Increased Mortgage Rates Privatizing Fannie Mae and Freddie Mac will likely cause mortgage rates to bounce right back up. Without implicit government backing, private entities would need to price in additional risk premiums, making conforming loans more expensive.

2. Expanded Private Market Opportunities The privatization could create significant opportunities for private mortgage note investors by:

• Reducing competition from GSEs: As conforming loan rates become less attractive, more borrowers may turn to private lenders

• Creating market gaps: Higher conforming loan rates could push more loans into the jumbo/non-conforming category where private investors operate

• Increasing demand for private capital: Without the GSE backstop, there would be greater need for private investment in mortgage credit

3. Secondary Market Transformation Currently, most conforming loans flow through the GSE securitization machine. Privatization would:

• Fragment the secondary market: Instead of two dominant GSE channels, multiple private entities would compete

• Increase pricing volatility: Without government backing, mortgage-backed securities pricing would become more market-driven

• Create new trading opportunities: More diverse mortgage products and pricing structures

4. Risk Assessment Changes The proposal includes creating competition to the "duopolistic role" of the GSEs as an "essential" piece of reform, which would:

• Diversify credit standards: Multiple private entities would develop their own underwriting criteria

• Increase due diligence importance: Without standardized GSE backing, investors would need more sophisticated risk assessment

• Create pricing arbitrage opportunities: Different entities pricing similar risks differently

Timeline and Political Reality

President Trump has said he is "giving very serious consideration" to spinning off the mortgage giants, though experts believe full privatization faces significant obstacles. The complexity of unwinding entities that were bailed out with $187 billion (now repaid with interest).

Investment Implications

For mortgage note investors, GSE privatization could represent a significant market opportunity:

Short-term effects:

• Increased demand for private mortgage capital

• Higher yields on new originations due to increased rates

• More distressed note opportunities as some borrowers struggle with higher rates

Long-term effects:

• Larger addressable market as private lending expands

• More diverse mortgage products and structures

• Potentially higher returns due to reduced government competition

Risks to consider:

• Initial market disruption and volatility

• Increased regulatory uncertainty during transition

• Potential for broader housing market instability

The privatization of Fannie Mae and Freddie Mac would likely be a net positive for mortgage note investors, creating more opportunities in an expanded private market while reducing government-subsidized competition. However, the transition period could bring significant market volatility that investors would need to navigate carefully.

This content is for informational purposes only and does not constitute investment advice. Consult with qualified professionals before making investment decisions.

Transparency

Distressed CRE Deals Are Finally on the Table

It’s official—commercial real estate distress is no longer just a talking point; it’s here, and it’s sizable. According to MSCI Real Capital Analytics, total CRE distress jumped 23% year-over-year to more than $116 billion by the end of March—marking the highest level we’ve seen in over a decade. Green Street notes that delinquencies are still on the rise, though the pace is slowing a bit.

So, what’s behind the surge? Higher borrowing costs have squeezed owners who financed at ultra-low rates, and remote work has left some office properties underused and underperforming. For lenders, that’s meant more risk on the books. For owners without the equity cushion or refinancing options, it’s meant hard decisions—often ending in a sale.

The silver lining? If you’re sitting on capital and can move quickly, the current market could be a rare window. Motivated sellers are starting to accept meaningful discounts, especially on assets that couldn’t refinance at today’s rates or were hit hard by post-pandemic demand shifts.

This kind of dislocation doesn’t come around often. For investors willing to wade into the mess, there’s potential to pick up strong properties at prices that make long-term sense. It’s not without risk, but moments like this are often when the best deals are made. I for one will be exploring some distressed CRE Funds.  

Mid-Year CRE Snapshot: The Only Constant Is Contrast

Halfway through 2025, the commercial real estate picture is looking split. In Manhattan, momentum is real—leasing activity hit 20.6 million square feet in the first half, driven by a wide range of industries and an uptick in large transactions. There were 21 deals over 100k square feet—the strongest first-half tally since 2019. Availability is down to 16.4%, the lowest in four years, as both direct and sublet space tightened.

But outside of Manhattan, the story shifts. San Francisco’s vacancy climbed 330 basis points in the past year to 28.4%, while the Bay Area overall hit 25%—up 510 basis points. Nationally, office vacancies are stuck at a record 13.8%, with little improvement expected this year.

The takeaway? We’re seeing a clear “flight to quality.” Manhattan’s financial and professional services core has kept demand strong, accounting for over a third of leasing so far in 2025. Meanwhile, markets without solid anchor industries are still searching for footing. If the trend holds, 2025 will reward prime locations—and make it harder for the rest to catch up.

CRE Prices: Frozen, Not Falling

The latest Green Street Commercial Property Price Index barely moved in July—down just 0.1%—and that’s the story. Over the past year, values crept up 3.2% but remain nearly 18% below their 2022 peak. Instead of sharp drops, we’re stuck in a “shadow freeze” where few sales happen, and owners simply hold rather than accept steep discounts.

Elevated interest rates, persistent borrowing costs, and economic uncertainty keep both buyers and sellers on the sidelines. Without forced selling, prices are holding steady, but that stability masks where values might land if distress returned.

Office is still the weakest link, down 37% from the peak, while strip retail and manufactured home parks have been steadier thanks to even lighter deal flow. Unless rates fall—or an external shock (CRE debt for one) forces assets to market—expect this standoff to last.

Private Credit Rises to Meet CRE Debt Crunch

Over the past week, analysis has highlighted a notable shift: the U.S. commercial real estate (CRE) debt market is being reshaped by a growing “wall of debt” and the expanding role of private credit. With about $1.1 trillion in CRE loans maturing in 2025, and traditional lenders pulling back, private lenders are stepping up with flexible, bespoke financing solutions. These private credit deals offer longer maturities, tailored covenants, and higher yields—creating a high-conviction, lower-volatility opportunity especially appealing amid today’s fixed-income stagnation.

Sustainability is also playing a bigger role, as ESG-linked financing (like energy retrofits) becomes a key differentiator in risk-adjusted returns. Resilient sectors—industrial and multifamily—are attracting strong interest, while office markets remain under pressure with urban vacancies exceeding 20%.

Bottom line: For CRE investors, the rise of private credit is giving low-risk income opportunities and fresh capital flow—especially in nontraditional sectors and those aligned with ESG trends.

Community

An In-Depth Look at Saint Investment Group's Offerings

Saint Investment Group presents a compelling opportunity for accredited investors seeking passive income through real estate. The firm's flagship Saint Income Fund claims to deliver impressive annual returns of 12% to 14.28% by investing in residential mortgage notes. A closer look shows that rates are as low as 6.2% for a 6 month term. Their strategy is centered on a market arbitrage play: they acquire mortgages with low, fixed interest rates (3-4%) and capitalize on a market where current rates are significantly higher (7-8%). The premise is that homeowners with these favorable rates are highly motivated to keep their payments current to avoid losing their mortgages, which in turn provides a steady cash flow for the fund. The firm promotes its success with claims of over $211 million in assets under management and more than a decade of consistent distributions. While the investment model has a sound theoretical basis, a closer look at the firm's structure and history reveals several factors that warrant careful due diligence.

While Saint Investment Group projects a strong and established image, an analysis of its regulatory footprint presents a mixed picture. The firm has taken a key step towards formalizing its offerings by filing a Form D with the U.S. Securities and Exchange Commission (SEC). This filing indicates they are legally operating within the framework for exempt securities offerings, which is a crucial point for investors. However, a search of regulatory databases shows that neither the firm nor its founder, Nic DeAngelo, are registered as licensed broker-dealers or investment advisers. This absence of professional licensing and the accompanying regulatory oversight means that investors have fewer official protections and recourse options compared to a traditional, fully registered firm. For a company offering such high returns, this lack of registration is a significant factor to consider.

Beyond regulatory status, there are notable inconsistencies in the firm's public history. Saint Investment Group’s claim of a ten-year track record of consistent distributions stands in contrast to its very recent Better Business Bureau (BBB) accreditation, which was only granted in February 2025. This recent accreditation, along with a limited number of public reviews, raises questions about the firm's operational history and transparency. When a company with a purported decade-long history has only just recently formalized its BBB status, it could signal a change in business structure or a recent effort to build a public-facing reputation. For accredited investors considering this fund, these inconsistencies are key areas to probe. It is essential to demand full documentation, including comprehensive offering memoranda, third-party audited financials, and a clear history of regulatory compliance. Without this detailed information, the opportunity, despite its attractive returns, remains speculative and should be approached with extreme caution.

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