📉 CRE CLO Distress Hits 2025 Low — But Maturity Defaults Are Exploding 🚨

🏦 CRE CLO Market Rebounds in 2025 — Even as Non-Performing Maturities Surge ⚠️

📉 CRE CLO Distress Hits 2025 Low — Even as Maturity Defaults Surge

The CRE debt markets are sending mixed messages as we close out 2025. On the surface, distress levels inside the CRE CLO sector have continued to improve. But beneath the headline optimism lies a growing concern: a surge in non-performing matured loans that is now dominating lender attention, underwriting conversations, and refinance strategies.

As a mortgage brokerage serving commercial investors nationwide, Medallion Funds helps borrowers navigate these shifting conditions — and today’s data tells a story every investor and operator should be watching closely.

📈 CRE CLO Issuance Surges as the Market Reopens

CRE CLO issuance has roared back to life. Through November 2025, total issuance hit $25 billion YTD, nearly triple the $8.7 billion pace from this time last year.

This rebound signals:

·A return of risk appetite among lenders

·Improved liquidity for bridge and transitional assets

·Investor confidence in sponsors with strong business plans

But the healthier issuance volume tells only half the story.

📉 Distress Levels Hit 2025 Lows — A Real Sign of Stabilization

According to CRED iQ:

·The distressed rate fell to 10.7% in October,

·Down 82 bps month-over-month,

·And down 144 bps year-over-year.

CRE CLO delinquencies improved as well:

·8.5% in October, down from 9.2%

However, special servicing inched up to 7.3%, proof that many properties still face cash-flow or business-plan issues requiring active workout strategies.

This is the contradiction of today’s market: distress is falling, but risk is rising.

🚨 The Real Threat: Non-Performing Matured Loans Spike to 43%

The most concerning trend is the rapid growth in non-performing matured loans:

·Jumped 720 bps to 43.0%

·66.3% of all allocated loan balances are now matured

o23.3% performing maturities

o43.0% non-performing maturities

Meanwhile:

·Current loans dropped to 18.2%

·Short-term delinquencies rose from 0.5% → 2.5%

This is the maturity wall in full effect.

Borrowers who took 2021–2022 floating-rate bridge loans are struggling to refinance into a market with:

·Lower valuations

·Higher debt yield requirements

·Tighter DSCR minimums

·Reduced lender leverage

Even with rate relief, the refinancing gap is widening.

🏦 What This Means for Investors, Sponsors & Lenders

The story going into 2026 is simple:

Headline distress is improving… but maturity risk is the real storm.

Borrowers must now:

·Reposition their assets faster

·Shore up NOI

·Inject fresh equity

·Prepare recapitalization strategies

·Move early on refinancing

Lenders, including Medallion Funds’ 600+ capital partners, are already adjusting underwriting around:

·Reduced leverage

·Tighter DSCR overlays

·Greater scrutiny of trailing-12 cash flow

·More conservative ARVs on transitional assets

The borrowers who win in 2026 will be those who prepare before maturity — not after.

💡 How Medallion Funds Helps Borrowers Navigate the Maturity Wall

We assist investors by:

·Running refinance stress tests

·Modeling exit DSCR + valuation scenarios

·Matching borrowers to bridge, bank, debt fund, or private capital

·Structuring rescue capital when needed

·Managing lender communications + underwriting

Whether you’re navigating a 2025/2026 maturity or preparing to acquire transitional assets, planning early is essential.

Final Takeaway

The improvement in CLO distress rates is real — but the surge in non-performing maturities is the bigger, more consequential story.

For investors, the opportunity is clear: transitional assets with strong operators and the right capital stack will be the big winners of the next cycle.

For borrowers, the message is even clearer: prepare now, before your refinance becomes a crisis.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory