Fewer Americans struggling to pay the mortgage

Fewer Americans are falling behind on their home loans, a sign the U.S. economy is distancing itself from the housing crash.

In the second quarter, the percentage of homeowners who were delinquent on their mortgages dropped to 3.46 percent, the lowest level in six years, according to TransUnion. That is also down from 4.2 percent in the first three months of the year and amounts to a 20 percent drop from a year ago.

Steve Chaouki, head of financial services for TransUnion, said a number of factors explain why mortgage delinquencies are down. "These include the clearing of severely delinquent accounts through foreclosure as well as a lower rate of new delinquencies from post-recession vintages, which generally are of significantly higher credit quality and have experienced much better performance than mortgages originated before the recession," he said in a statement.

The three states hardest hit by the mortgage meltdown -- Nevada, California and Arizona -- saw the biggest declines in delinquency rates, down an average of 32 percent from the first quarter of 2013. In Florida, another state damaged by the housing sector, the rate remains high, with 7.11 percent of homeowners late on their mortgage payments.

Earlier this month the Mortgage Bankers Association reported that foreclosure starts also fell in the second quarter and are now back down to pre-crisis levels. In the third quarter of 2009, when the crisis was at its worst, foreclosures were started on 1.42 percent of home loans. Last quarter that number fell to only 0.4 percent.

Although the housing sector has stabilized, the total number of homes in foreclosure remains well above the historical average. In the second quarter, 2.49 percent of homes were in the foreclosure process, down from the peak of the crisis, but still well above the 1 percent or so rate typical for a healthy real estate market.

That rate is expected to return to its historical average sometime in 2016.

"The percent of loans in the foreclosure process also peaked in 2010 and is close to two-thirds of the way back to normal," economist Bill McBride wrote in his blog, Calculated Risk. "So it has taken about four years to reduce the backlog by two-thirds, so a rough guess is that delinquencies and foreclosures will be back to normal in about two years."

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    Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.

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