Debt-service coverage ratio (DSCR) is a property's net operating income divided by its debt service. A DSCR above 1.0 means the property covers its loan payments; below 1.0 means it does not, a common sign of a stressed commercial credit.
DSCR is one of the clearest measures of whether a property can carry its loan. A falling or sub-1.0 DSCR signals a credit headed for default or maturity stress — and drives how a buyer prices it.
Why credits like this reach a workout desk: bank noncurrent commercial real-estate loans have risen while reserve coverage slips at community banks (FDIC Quarterly Banking Profile), and roughly $957 billion of commercial and multifamily mortgage debt was scheduled to mature in 2025 — against a total market of about $4.8–5.0 trillion, ~38% of it held by banks and thrifts (Mortgage Bankers Association). See the CRE distress statistics hub for the full figures and sources.
Primary sources: FDIC Quarterly Banking Profile, Mortgage Bankers Association, and interagency (FDIC / OCC / Federal Reserve) guidance on CRE loan accommodations and workouts. Figures are directional and updated periodically; confirm the latest release before relying on a specific number.
Lenders often look for 1.20x or higher at origination; below 1.0 means the property's income does not cover debt service.
A low or sub-1.0 DSCR signals stress and a wider discount to balance, because the property does not currently support its debt.
No — a buyer prices the cash-flow shortfall into the bid; sub-1.0 credits are routinely sold.