Commercial real estate lenders modified $11.2 billion in loans during the third quarter of 2025, underscoring a persistent strategy known in the industry as “extend and pretend,” according to CRED iQ. This approach, which involves extending loan maturities rather than forcing technical foreclosures, has drawn increasing concern over growing market stress, borrower resilience and challenges specific to certain property types.
The “extend and pretend” tactic is far from new. It was widely employed following the 2012 market crisis to delay foreclosures that would have added problematic assets to lenders’ balance sheets. Now, amid elevated interest rates and declining property valuations, the trend has accelerated. Loan modifications in 2023 more than doubled those in 2022, and by mid-2025, the total value of commercial real estate loan modifications had surged 66% over the prior four quarters, according to an analysis by the Federal Reserve Bank of St. Louis.
The $11.2 billion in third-quarter modifications covered about 150 loans, with maturity date extensions accounting for 67% of these changes. Forbearance made up 5.8%, combined approaches 14.1% and other types of modifications 12.5%, while 0.6% remained unspecified, CRED iQ detailed.
By property sector, the hotel industry represented the majority of modified dollars, totaling $5.5 billion across 53 loans—more than half of the volume. Multifamily properties had the highest number of modified loans at 55, but the combined balance was around $1.4 billion (14.1%). The office sector also accounted for about $1.4 billion across 36 loans (14.7%), followed by mixed-use properties with 20 totaling $891.9 million (9.2%). Retail had six for $156.2 million (1.6%), self-storage had three worth $150 million (1.6%) and industrial properties posted only five with a total of $55.8 million (0.6%).
A closer look at the sizes showed that those exceeding $100 million made up 50 of the modified loans and accounted for $5.9 billion, more than half of the total dollar volume. Some 38, were between $50 million and $100 million, for a total of $2.5 billion. Another 73 ranged from $20 million to $50 million for $2.3 billion, while smaller debts between $10 million and $20 million represented 24, worth $670.4 million. Lastly, 30 loans under $10 million comprised $145.9 million, indicating that smaller types are less frequently modified. Combining the two largest categories, $50 million or more accounted for over 74% of total modified balances.
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