NEW YORK ( TheStreet) -- Mortgage default rates and foreclosure levels have returned to more normal historical levels, according to the Mortgage Bankers' Association's quarterly National Delinquency Survey. The delinquency rate for one-to-four unit residential mortgages fell to 6.96%, its lowest level since mid-2008. That is down 62 basis points or 0.62 percentage points from a year earlier. The delinquency rate includes loans that are at least one month's payment past due but not in foreclosure. The percentage of loans on which fresh foreclosure action was taken fell to 0.64% from 0.7%, the lowest level since the first quarter of 2007. The percentage of loans in the foreclosure process at the end of the second quarter was 3.33%, down 22 basis points from the first quarter and 94 basis points from a year earlier. Overall, the percentage of loans that were at least one payment past due or in foreclosure was at its lowest level in five years, decreasing to 10.13% on a non-seasonally adjusted basis, down 149 basis points from a year earlier. "For most of the country, delinquencies and foreclosures have returned to more normal historical levels," according to Jay Brinkman, MBA's chief economist. "Most states are at or only slightly above longer-term averages, and some of the worst-hit states are showing improvement. For example, while 10% of the mortgages in Florida are somewhere in the process of foreclosure, this is down considerably from the high of 14.5% two years ago." States where foreclosures need to be approved in court continue to account for a disproportionate share of foreclosures. The foreclosure inventory rate in so-called judicial states averaged 5.59%, triple that of the 1.86% in non-judicial states. Judicial states with the longest foreclosure backlogs include Florida, New Jersey, New York and Illinois. The strong improvement in mortgage default rates has benefited banks significantly, with banks such as Wells Fargo ( WFC), Bank of America ( BAC), JPMorgan Chase ( JPM) and more recently Citigroup ( C)releasing mortgage loan loss reserves that had been set aside for future defaults.P/> -- Written by Shanthi Bharatwaj in New York.