Commercial real estate lending saw unprecedented growth in 2025, defying expectations. In this episode of Credit Union Conversations, host Mark Ritter sits down with Kristina Paulson to explore the dramatic 30% increase in loan volume despite persistently high interest rates. They discuss evolving debt service coverage ratio requirements, the impact of rate resets on existing portfolios, and creative loan restructuring strategies. Kristina shares insights on commercial loan underwriting challenges, softening office building markets, and property values holding steady across most sectors. The conversation offers a critical perspective on credit union lending portfolio management and what commercial real estate market trends to expect in 2026. Stay tuned at the end to hear their favorite Christmas traditions.

WHAT YOU WILL LEARN IN THIS EPISODE:

✅ How credit unions managed a surprising 30% surge in loan volume throughout 2025, despite high interest rates and why similar lending trends are expected to continue into 2026.

✅ Why debt service coverage ratio minimums have increased from 1.20 to 1.25 across the industry, and how commercial loan underwriting standards have become more meticulous due to rising insurance, utilities, and operating expenses.

✅ Which commercial real estate sectors face the most significant risk, particularly office buildings experiencing rate resets from low-interest loans originated in 2020-2021, and what creative loan restructuring strategies are emerging?

✅ How property values are holding steady in most markets, while credit union portfolio managers must monitor existing loans more carefully as higher expenses impact DSCR requirements and risk ratings.

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TIMESTAMPS:

00:00 2025 commercial real estate lending trends, MBFS growth, the unexpected surge in loan volume

03:04 Interest rates reality check: Why predicted rate drops never materialized and how borrowers adapted to the higher rate environment for commercial loans

06:01 Debt service coverage ratio challenges: Rising DSCR requirements, increased scrutiny on insurance, utilities, and operating expenses in commercial loan underwriting

08:02 Property values holding steady, loan amounts decrease to maintain the debt service coverage ratio, and troubled commercial real estate loans as they roll over for refinancing in 2026-2027

10:39 Holiday traditions discussion: Kristina shares family Christmas celebrations, decorating, baking cookies, and extended family gatherings on Christmas Eve

12:26 Childhood Christmas memories: for the Paulson and Ritter families

KEY TAKEAWAYS:

💲Commercial real estate lending volume increased over 30% in 2025 across the industry, requiring credit unions to rapidly expand their teams despite initial expectations of a flat year, with similar loan volume anticipated for 2026.

💲Debt service coverage ratio standards have tightened industry-wide, with minimum requirements rising from 1.20 to 1.25 as lenders account for inflation's impact on insurance, utilities, and operating expenses in commercial loan underwriting decisions.

💲The most significant portfolio risks exist in office buildings and larger metropolitan markets where rate resets from ultra-low 2020-2021 loans are creating coverage challenges, requiring creative loan restructuring or property conversions to alternative uses like apartments.

ABOUT THE GUEST:

Kristina Paulson - LinkedIn

RESOURCES MENTIONED:

Mark Ritter - Website

Mark Ritter - LinkedIn

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