The decline in negative equity has helped lower the number of new defaults. New problem loan rates -- seriously delinquent loans that were current six months ago -- are down to less than 1% for the first time since March 2007, according to a recent report from CoreLogic. Banks are also offering to modify borrowers' mortgages and while the re-default rates are still high, it is helping to lower the overall default rate. TransUnion expects the mortgage delinquency rate to fall to 4.5% by the end of the second quarter of 2013.
"There is no reason to believe the decline in mortgage delinquencies will not continue," said Martin. "All housing data point to further improvements in the delinquency rate, though as in the past few years, this also will hinge on how quickly older vintage loans clear through the system. We do not know if the first quarter was a blip, or if it's the beginning of a more rapid decline." All states saw an improvement in mortgage performance. Arizona and California lead the declines in delinquency rates, followed by Colorado, Michigan and Minnesota. Florida, one of the hardest hit states by the housing crisis, saw a 21% drop. Overall, the mortgage debt per borrower declined by 0.4% to $186,018 from the fourth quarter of 2013. -- Written by Shanthi Bharatwaj in New York. >Contact by Email. Follow @shavenk