For the first time since May of 2007, fewer than 1% of new loans are classified as ‘problem’ mortgages, according to a new report from Lender Processing Services.

The mortgage analytics firm paints a picture of fewer troubled loans and even says with new problem loans in March coming in at 0.84%, the rate is close to pre-crisis levels exhibited in 2004-2005 when only 0.55% of loans were in some stage of distress.

Still to this day, underwater borrowers are more likely to default than mortgage holders with equity, and those with loan-to-value ratios between 100%-to-110% are defaulting at more than twice the national average (1.9%).

Borrowers who are 50% underwater, or carrying LTVs of 150% or higher, default at a rate that is five times the national average, while those with equity outperform the national average exhibiting a problem loan rate of just 0.6%—on par with pre-crisis levels. 

And with home prices consistently rising over the course of the past year, the number of loans underwater or with LTVs over 100% has dropped by 41% between January 2012 and January 2013.

In 2011 at the peak of the underwater crisis, 17 million homes were in negative equity.

Today, only 9 million loans are in this state, LPS said.

About 17.9% of loans in the U.S. continue to have LTVs greater than 100%, which means 80% of borrowers are exhibiting new loan problem rates that reflect what LPS calls ‘normal market’ years.

LPS concluded that the total U.S. loan delinquency rate for March hit 6.59%, and the month-over-month change in the delinquency rate showed it falling 3.13%.

Overall, the total U.S. foreclosure presale inventory rate hovered at 3.37%, while the month-over-month change in the foreclosure pre-sale inventory rate fell 0.41%.

States with the highest percentage of non-current loans include Florida, New Jersey, Mississippi, Nevada and New York.

Meanwhile, those with the lowest percent of delinquent mortgages include Montana, Alaska, Wyoming, South Dakota and North Dakota.