Posts

loan modification on highway sign_shutterstock_46325077 800x315

Loan modifications—often labeled “extend-and-pretend” strategies for obvious reasons—have become a regular tool in the commercial real estate (CRE) sector. And according to a new analysis from CRED iQ, their use has increased sharply.

CRED iQ reviewed trends in modifications across various loan types, including CMBS, SBLL, CRE CLO, and Freddie Mac loans. The analysis, which looked at both recent trends and data over the past three years, found a significant uptick in these modifications.

Between March 2024 and March 2025, the volume of modified loans nearly doubled, jumping from $21.1 billion to $39.3 billion—an 86.3% increase. Just last month, $2 billion worth of modifications were made across 47 loans, marking the highest activity since May 2024.

It’s important to note that the data doesn’t cover commercial bank CRE loans, which are a major portion of the overall market. Even so, the figures provide insight into growing reliance on loan extensions. Modification sizes have ranged from as little as $11.3 million in July 2022 to as much as $2.4 billion in July 2023.

Many of these extensions stem from loans initially extended in 2024, now creating a wave of upcoming maturities. Expectations that Federal Reserve rate cuts might ease refinancing pressures have largely faded, leaving borrowers to manage rising debt costs on their own. In this environment, banks are eager to avoid labeling loans as troubled, so modifications are often the preferred route.

One example CRED iQ highlighted is Chicago’s Willis Tower. The 3.8 million-square-foot building had a $1.33 billion interest-only loan originally due in March 2022. After multiple one-year extension options, a recent modification extended the due date further—this time to March 2028. Despite this, the tower is performing decently, with an 83.1% occupancy rate and a debt service coverage ratio of 1.32.

So what does all this mean in a market without the relief of lower interest rates? CRED iQ suggests these trends reflect a broader change in CRE financing. The nearly $40 billion in modified loans is a signal of both caution and adaptability in the sector.

“The commercial real estate sector is at a turning point,” CRED iQ said, with the implications for investors and lenders still unfolding.

 

Source:  GlobeSt.

 

distressed-loans-800x315-1.jpg

Distress hit a new record for the third consecutive month according to a new report from CRED iQ. It was up 14 basis points in May and reached 8.49%.

“The CRED iQ team evaluated payment statuses reported for each loan, along with special servicing status as part of our monthly distress update,” they wrote. “CRED iQ’s special servicing rate now stands at 8.09% and the CRED iQ delinquency rate is at 5.8% for this month.”

The delinquency rating includes “all CMBS properties that are securitized in conduits and single-borrower large loan deal types” but not Freddie Mac, Fannie Mae, Ginnie Mae, and CRE CLO loan metrics, which are treated in separate analyses.

CRED iQ calculates distress levels by looking at both delinquency and specially serviced rates.

“The index includes any loan with a payment status of 30+ days or worse, any loan actively with the special servicer, and includes non-performing and performing loans that have failed to pay off at maturity,” they write.

Most property types are flashing red as distressed rates run from 7.1% in multifamily (improved by 10 basis points month over month), 11.1% in office (better by 60 basis points), 11.3% in retail (better by 60 basis points), and 9.4% in hotel (worse by 70 basis points). Industrial was at 0.5% (10 basis points worse) and self-storage, 0.1% (flat).

This being about CMBS, one single event can have an outsized effect on the whole picture.

“One example of a recent hotel default includes the Grand Wailea hotel, which is backed by a $510.5 million loan with an additional $289.5 million in mezzanine debt,” they wrote. “This was the primary driver of the increased distressed rates in hotels this month. The loan fell delinquent (performing matured) as it failed to pay off at its May 2024 maturity date. Commentary indicates there are five, one-year maturity extension options. The 776-room, oceanfront, luxury resort is located on the south shore of Wailea, Maui. The asset was performing with a below breakeven DSCR of 0.93 and 49.9% occupancy as of year-end 2023.”

Of the loans, 24.4% are currently, 2.0% are late but in the grace period, and 5.5% are late but less than 30 days.

Source:  GlobeSt.