The amount of mortgages in the earliest stage of delinquency at the end of March dropped to the lowest level since the first quarter of 2008, federal banking regulators said. The Office of the Comptroller of the Currency and the Office of Thrift Supervision studied delinquency levels on 63% of all mortgages outstanding in the U.S. in the first quarter — roughly 32.7 million loans held by select banks. The percentage of mortgages between 30- and 59-days delinquent dropped 16% from the previous quarter and 5.8% from one year ago. The percentage of loans current and performing reached 88.6% in the first quarter, up a full percentage point from the end of 2010 and up 150 basis points from the first quarter of last year. It's also the highest level since the second quarter of 2009. Seriously delinquent mortgages declined for the fifth straight quarter, a 9.4% drop from the previous quarter and down 25% from last year. However, the foreclosure pipeline continued to balloon. More than 1.3 million mortgages are somewhere in the foreclosure process, according to the report, up 7.9% from a year ago and relatively flat with the previous quarter. Banks repossessed or completed short sales on more than 171,000 homes in the first quarter, up 17.4% from the previous quarter but still down 17.5% from one year ago as servicers work to restart the process. Major servicers and lenders froze the foreclosure process at the end of last year to correct improperly handled documentation. Still, servicers implemented nearly three times as many workout plans as they completed foreclosures. More than 557,000 modifications, trial-period plans or restructured payment plans started in the first quarter. While these home-retention actions increased 17.4% from the previous quarter, the total dropped 10.5% from one year ago. "The large inventory of seriously delinquent mortgages and foreclosures in process continued to work its way through the loss mitigation process — either through home-retention actions such as modification or through foreclosure when alternatives were not possible," the OCC said. Write to Jon Prior. Follow him on Twitter @JonAPrior.