CRED iQ tracked a total of 82 modified Commercial Mortgage-Backed Securities (CMBS) and Commercial Real Estate Collateralized Loan Obligation (CRE CLO) loans between May and July 2026, with a total outstanding volume of USD 2.36 billion. The composition of these adjustments differs from the situation observed just a few quarters ago. While the practice of “extend and pretend” has not disappeared, it no longer represents the overall picture. Forbearances and combined modifications are increasingly gaining weight alongside pure maturity extensions, with the majority of the volume now concentrated on mid-sized rather than mega-loans.
Surprisingly, the sector with the most modifications is no longer hotels or offices, but the multifamily segment. Of the USD 2.36 billion adjusted during the reporting period, maturity extensions still constituted the largest single category, with 21 loans totalling USD 802.5 million, representing 34 per cent of the modified volume (25.6 per cent of the loan count). Forbearances followed with 15 loans and USD 514 million (21.8 per cent of volume), while combined modifications – agreements that combine an extension with other relief measures such as amortisation, interest rate adjustments, or reserve requirements – accounted for 10 loans and USD 345.6 million (14.7 per cent of volume).
The remaining 36 loans, valued at USD 695.4 million (29.5 per cent of volume), fell into other or various modification categories. In total, extensions, forbearances, and combined modifications – those categories most closely associated with lenders buying time on distressed collateral – accounted for 70.5 per cent of the modified volume during this period. This is a decrease from the almost universal “extend and pretend” theme of earlier reports. Lenders appear to be utilising a broader range of tools than a simple maturity extension.
Multifamily loans led modification activity by a wide margin, representing a departure from the distress driven by hotels and offices in previous quarters. The rise of the multifamily sector to the top of the modification table is notable, as this sector enjoyed a reputation for relative stability at the start of the cycle. Interest rate adjustments on floating-rate loans and slower rent growth in oversupplied metropolitan areas appear to be burdening borrowers who had originally calculated with more favourable financing conditions. Hotels remain a source of distress, accounting for about a fifth of the modified volume.
- —Multifamily: 35 loans, USD 1.14 billion (48.4 per cent of modified volume)
- —Hotels: 15 loans, USD 493.8 million (20.9 per cent)
- —Retail: 6 loans, USD 236.7 million (10 per cent)
- —Office: 17 loans, USD 226.2 million (9.6 per cent)
Office properties, long the prime example of distress in commercial real estate, accounted for less than 10 per cent of the modified volume during this period – a smaller share than multifamily or hotels. In the modification distribution by loan size, in contrast to the previous report where loans of USD 100 million or more made up the bulk of the modified volume, mid-sized loans now dominate. Loans between USD 20 million and USD 50 million represented 38 loans with a volume of USD 1.22 billion, accounting for 51.7 per cent of the modified volume.
The average modified loan volume was USD 28.7 million, with a median of USD 23.1 million. This highlights that the current distress is manifesting in the broad mid-market and no longer solely in a few trophy asset workouts. The data from May to July 2026 indicates a broadening, not concentrating, modification landscape. Multifamily has overtaken hotels and offices as the property type with the highest modification activity. This serves as a reminder that distress shifts across sectors as financing conditions and local fundamentals change.
The distribution of loan sizes has also flattened: instead of a small number of massive loans accounting for the majority of the dollar volume, mid-sized loans in the USD 20 million to USD 50 million range now contribute the largest share of modified volume. The toolkit of modifications itself appears more diverse, with forbearances and combined structures narrowing the gap with maturity extensions, which once defined the “extend and pretend” strategy. None of these findings indicate an easing of distress – USD 2.36 billion in loans required some form of relief within three months, and over 70 per cent of this volume occurred as extensions, forbearances, or combined modifications aimed at buying borrowers time. However, the nature of this distress has changed, and lenders and borrowers appear to be utilising a broader range of options than a pure maturity extension.
