Home value appreciation is contributing to a decline in the total balance of first mortgages that are 90 days or more past due or in foreclosure, according to an Equifax report released today.

The balance of such severely delinquent first mortgages hit a five-year low of $325 billion in June, down more than 27 percent from June 2012. Only 7 percent of that total is from mortgages originated in or after 2010.

The total balance of first-mortgage loans that completed the foreclosure process and became bank-owned or changed to another “severe derogatory status” fell by more than 19 percent year over year in June to $13.5 billion — the lowest June level since 2007, Equifax said.

“Rising home values are reducing the incentives for homeowners to default on their mortgage loans, resulting in more and more homeowners transitioning into positive- or near-positive-equity territory,” said Equifax Chief Economist Amy Crews Cutts in a statement.

“The implications of this trend are that more homeowners will be able to sell their homes without the hassles of negotiating a short sale or move to take a new job without worrying how they can afford to pay for two homes. The healing in the housing market is really gaining momentum and will fuel a stronger pace of economic recovery.”

Source: Equifax

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