U.S. Banks Face Rising Risks as CRE Loan Modifications Surge

Banks across the U.S. are racing to restructure struggling commercial real estate (CRE) loans as higher interest rates and declining property values tighten the pressure on borrowers and lenders. Modification momentum: According to data from the St. Louis Fed, the total value of modified CRE loans jumped 66% year-over-year through June 2025. These adjustments—ranging from…

Rising loan modifications signal mounting challenges for commercial real estate (CRE) lenders, as the traditional “extend-and-pretend” approach faces increasing limits. Modification Trends: Banks have significantly increased modifications on non-owner-occupied (NOO) CRE loans, with a 65-basis-point rise in the first nine months of 2024—a 35% jump since mid-year, according to Moody’s. Smaller banks led the charge…