The distress rate1 in KBRA-rated private-label U.S. commercial mortgage-backed securities (CMBS) was 10.5% across $340 billion outstanding balance as of June 2025, up from 8.5% the year prior and 4.6% three years ago in June 2022. With increased distress, the balance of loans with servicer advances (SA) in CMBS 2.02 have risen to $55 billion (8.3% of outstanding CMBS balance), increasing 33% a year on average over the same three-year period. The aggregate dollar amount of outstanding advances has increased a more moderate pace to $2.1 billion (32 basis points (bps) of CMBS balance), or 9% annually over the past three years, as it takes time for newly distressed loans to accumulate SA.
We expect servicer advance amounts to continue to rise over the next year, even if the distress rate holds relatively steady, as commercial real estate (CRE) continues to feel the effects of higher interest rates, inflationary…