🚨Texas logged ≈ $575 million in commercial mortgages set for foreclosure in October (≈ 30 properties), down from $710 million in September [Source: The Real Deal]. Multifamily assets dominate—particularly Houston’s $270 million in Harris County—reflecting how 2021–22 floating-rate debt is breaking under 6 %+ financing costs and stalled rent growth. Repeat listings suggest lenders continue to extend where possible, but a steady “controlled burn” of distressed loans remains underway across the state.
Statewide CRE foreclosure postings: $575 M (Oct 2025) vs $710 M (Sep) — [Source: The Real Deal (Texas)].
Houston/Harris County share: ≈ $270 M across 11 properties (Oct) — [Source: Foreclosure Listing Service].
Typical loan vintage: 2021–22 floating-rate multifamily loans at 3–4 % initial rates — [Source: The Real Deal].
Recommended underwriting DSCR: ≥ 1.30× at current 6–7 % rates — [Source: The Real Deal].
Loan Performance. Interest-only bridge debt from 2021–22 now carries doubled debt service; many deals fail 1.0× DSCR without fresh equity. Rate-cap expirations and limited reserves drive defaults.
Demand Dynamics. Flat to negative rents in Texas metros erode NOI buffers; Class B/C occupancy remains mid-90 %, masking capital-stack weakness.
Asset Strategies. Operators pivot to cash-flow triage—tight expense control, delayed capex, and negotiated extensions. New buyers underwrite 5–7-year holds at discounted bases.
Capital Markets. Debt funds and local banks face mark-to-market pain but still prefer workouts; CMBS special servicers selectively liquidate weaker sponsors.
Higher-for-longer rates exposing aggressive 2021 multifamily underwriting.
Class B/C assets with bridge loans most vulnerable; stabilized A-core remains resilient.
Lenders extending but tightening covenants and reserve requirements.
Distress flow steady—not systemic—creating selective acquisition windows.
🛠 Operator’s Lens
Refi. Underwrite at 6–7 %; assume no rate relief before 2026; maintain 1.30× DSCR minimum.
Value-Add. Budget 18–24 mo interest reserves or rate-cap escrows; contingency ≥ 10 %.
Development. Pro formas stress-tested +100 bps cap rate reversion and 5-yr exit.
Lender POV. Texas banks favor extensions with new capital; note sales and REO transfers rising for non-performers.
Monitor November foreclosure totals for trend confirmation.
Fed rate path and refi liquidity will dictate next distress wave into 2026.
Expect ownership turnover as recap investors absorb failed 2021 vintages.
The Real Deal (Texas) — “Texas Multifamily Leads CRE Foreclosure Docket as Higher Rates Bite” (Oct 6 2025). https://therealdeal.com/texas Foreclosure Listing Service — Texas Commercial Foreclosure Postings (Oct 2025). Trepp — CMBS Conduit BBB– Spread Index (Oct 2025). https://www.trepp.com/treppinsights-conduit-loan-spreads
