Special servicer workout strategies shifted materially year over year, signaling a more decisive posture toward resolution rather than prolonged interim remedies. Comparing December 2025 to December 2024, the most notable development is the sharp increase in foreclosures, which now dominate the workout pipeline.
Foreclosure balances rose from approximately $9.5 billion (17.3%) in December 2024 to $15.9 billion (29.1%) in December 2025—an increase of more than 68% year over year. This dramatic expansion suggests that special servicers are increasingly concluding that consensual resolutions are no longer viable for a growing portion of distressed loans. Higher interest rates, persistent valuation pressure, refinancing challenges, and sponsor fatigue have collectively reduced the probability of successful extensions or modifications in many cases. As a result, foreclosure has re-emerged as the primary mechanism for loss resolution.
Other liquidation-oriented strategies also expanded. REO balances increased from $4.0 billion to $5.3 billion, rising from 7.3% to 9.7% of the pipeline, reflecting properties moving through the foreclosure process into owned status. DPO activity more than doubled, growing from 0.9% to 2.1%, indicating selective willingness to accept discounted payoffs where execution risk can be reduced.
By contrast, strategies associated with deferral or negotiation grew only modestly. Modification and extension activity increased slightly, from $9.1 billion (16.6%) to $9.5 billion (17.3%), suggesting that while servicers remain open to restructuring, this option is increasingly reserved for assets with clearer stabilization paths. Note sales declined both in balance and share, falling from 14.3% to 13.6%, signaling less appetite to offload exposure at prevailing bid levels.
Overall, the data points to a decisive pivot by special servicers. After years of extending, modifying, and delaying outcomes, 2025 reflects a transition toward enforcement and asset-level resolution. For investors, lenders, and sponsors, the message is clear: the window for cooperative workouts is narrowing, and the market is entering a more execution-driven phase of the CRE distress cycle.
About CRED iQ
CRED iQ is a leading commercial real estate (CRE) data and analytics platform designed to bring transparency, structure, and actionable intelligence to complex CRE debt markets. The platform aggregates and normalizes loan- and property-level data across CMBS, CRE CLO, Agency, and private credit, enabling investors, lenders, servicers, and advisors to analyze risk, performance, and opportunities within a single, unified environment.
CRED iQ specializes in advanced analytics for loan surveillance, distress tracking, special servicing activity, and workout strategies, with a particular focus on identifying early warning signals and resolution outcomes across the CRE lifecycle. By combining institutional-grade data infrastructure with AI-driven insights, CRED iQ helps market participants move beyond static reporting toward dynamic, forward-looking decision-making.
Users leverage CRED iQ to monitor delinquency trends, track foreclosures and REO pipelines, evaluate modification and extension activity, and assess portfolio exposure at the property, sponsor, and market level. The platform is built for speed, scalability, and precision—reducing manual research while increasing confidence in investment, underwriting, and asset management decisions.
Trusted by leading institutional investors, lenders, and advisory firms, CRED iQ delivers the data foundation required to navigate today’s evolving CRE market. For professionals seeking a comprehensive commercial real estate analytics platform with deep coverage of distressed debt, special servicing, and AI-powered insights, CRED iQ provides a differentiated, execution-ready solution.
