The U.S. mortgage delinquency rate declined in the first quarter to the lowest level since 2008 as an improving job market helped more borrowers pay their bills and tighter lending standards resulted in fewer defaults, according to a report Wednesday from the Mortgage Bankers Association (MBA).

The share of home loans at least 30 days late dropped to 7.4% from 7.58% in the previous three months, according to the report. The rate peaked at 10.1% in the first quarter of 2010 and was last lower in the third quarter of 2008, when it was 6.99%.

Loans more than 90 days overdue - the point at which lenders usually begin the process of seizing a property - fell to 3.06% on a seasonally adjusted basis from 3.11% in the first quarter and 3.62% a year earlier, according to the MBA. The share of homes that had received a foreclosure notice and hadn’t been seized by banks increased to 4.39%, up 1 basis point, or 0.01 percentage point, from the previous quarter, the trade group reported.

Mortgage servicers have slowed the pace of foreclosures since the fourth quarter of 2010, when they faced allegations of using improper and fraudulent paperwork to repossess homes with delinquent mortgages. The five largest servicers, including Bank of America and JPMorgan Chase, reached a $25 billion settlement with state and federal regulators in February.

“Delinquencies are clearly continuing to improve,” said Michael Fratantoni, the MBA's vice president of research and economics. “Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future.”

Housing starts increased 2.6% to an annual pace of 717,000 in April, beating analysts’ estimates and adding to evidence that the real estate market is strengthening, according to Commerce Department data reported Wednesday.

Falling delinquencies may help ease foreclosures and solidify a recovery in the housing market as low interest rates combine with decreased prices to stimulate demand. Housing affordability reached a new high in the first quarter and sales of previously owned homes rose 5.3% from a year earlier, according to the National Association of Realtors.

The largest share of troubled loans were originated in 2005 to 2007, according to the bankers group. Stricter lending standards and deflated prices for borrowers who received mortgages after the housing market collapsed account for better performance of loans issued since 2008, according to Jay Brinkmann, chief economist for the MBA.

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