FROM ORLANDO Low interest rates and plenty of capital hungry for deals made 2005 another record year for commercial and multifamily mortgage loan originations. In spite of the frothy news, many industry-watchers are waiting for the other shoe to drop: With roughly $2.5 trillion in commercial and multifamily mortgage debt, delinquency rates are close to nonexistent.

“Year over year, there was a 48% increase in commercial multifamily mortgage origination clearly driven by the availability level of capital,” said Jamie Woodwell, senior director of commercial/multifamily research at Mortgage Bankers Association during the group’s annual convention at the Walt Disney World Dolphin hotel. Leading the charge were loans for hotel and industrial properties, and for CMBS conduit investors.

Hotel loans grew by 230% from fourth-quarter 2004 to fourth quarter 2005, according to a newly released MBA survey, while office property loans grew by 46% and retail loans increased by 34%. The frontrunner was multifamily, which represented 36% of the total 2005 originations, followed by office loans at 24% and retail loans making up 17% of the total. MBA’s quarterly mortgage bank survey represents $67.5 billion in loan originations during the fourth quarter of 2005 and $201.7 billion over the entire year.

The widespread growth came from a number of different capital sources, according to the survey. Life companies, for instance, are in the third year of increasing level of commitment. “The CMBS market is records upon records this year,” noted Woodwell. “Commercial banks are doing a whole lot of lending as well. There’s a widespread availability of capital, from a lot of different investor groups.” Conduits represented nearly 38% of all loans followed by commercial banks at 21% and life companies at 25%.

One by-product of the capital glut, however, has been extremely low delinquency rates. With the flood of capital coming from all corners of the globe into the U.S. real estate market, not to mention low CAP rates and increasingly highly-leveraged deals, many experts want to know if rising delinquency rates will soon follow. Not necessarily, according to Jonathan Kempner, executive director of MBA “We’re almost at zero you sort of have only one way to go -- and that’s up,” says Kempner. “We don’t see any indicators today that would suggest a significant rise.” Woodwell also notes that delinquency rates are partially guarded against by the increasing transparency of the Commercial Mortgage-Backed Securities market, which is more closely scrutinizing loan pools trying to gain insight.

At the same time, the real estate cycle continues to turn. In this current environment, “vacancy rates have been pretty high; rents that have been fairly stable haven’t been growing that much,” says Woodwell. “And we’re starting to see the property market tighten up and vacancy rates drop and some the rent appreciation start to take hold.”