NEW YORK CITY—Expect more CMBS issuance backed by multifamily properties in the coming years. That's the long-term prediction by Trepp LLC in a newly issued study of the apartment sector, which also cites increased investment in multifamily as a result of loosening underwriting standards.

"The multifamily sector has shown generally strong occupancy and financial performance," says Joe McBride, research associate at Trepp. "Given the large balance of multifamily loans maturing in the next two years, these factors will serve as a pipeline for additional multifamily CMBS issuance growth."

Specifically, Trepp says more than 85% of the CMBS loans due to mature through 2020 are tied to apartment properties with average occupancy levels greater than 90%. Less than 10% of those loans have occupancies below 50%. The current year will see another $2.8 billion of non-agency CMBS loans maturing during the fourth quarter, and a total of $32.1 billion coming due in 2016 and 2017, representing 12.8% of the total of CMBS maturities during those two years.

Multifamily CMBS delinquencies peaked at 16.97% in early 2011 and have fallen "drastically" since early 2012, according to Trepp's report. They stood at 8.17% as of Oct. 31, and are expected to drop below 3.5% when the sale of the Peter Cooper Village/Stuyvesant Town complex to the Blackstone Group and Ivanhoé Cambridge is finalized. The $3-billion CMBS loan backed by that 11,000-unit Midtown South complex represents the bulk of multifamily delinquency volume.

During the same time period in which the late-pay rate on multifamily CMBS has diminished, so has agency share of multifamily originations as private capital has reemerged. Running on a parallel track has been a loosening of credit standards, with higher loan to values, lower cap rates and an increased emphasis on interest-only loan structures.

"The proportion of interest-only loans in new multifamily issuance has grown substantially in the past five years, from 19.76% in 2011 to 56.10% in 2013," says Trepp. In its report, Trepp cites the Office of the Comptroller of the Currency's Semiannual Risk Perspective for Spring 2015, which attributed lenders' increased risk tolerance to "the strengthening competitive atmosphere, persistent low interest rates and pressure to deploy capital."