The number of severely delinquent first mortgages declined 37% from its peak of $700 billion in January 2010 to $450 billion in May, Equifax said in the latest National Consumer Credit Trends Report. 

Of those delinquent loans, 70% are linked to mortgages opened between the years 2005 to 2007.

"That severe mortgage delinquencies are trending downward is not surprising given generally improving economic conditions," said Equifax chief economist Amy Crews Cutts. "What is surprising is that even with the foreclosure moratoriums and the slow resolution of foreclosure backlogs, the downward trend has been a steady, consistent drumbeat of recovery. If this pace continues, we expect the volume of severely delinquent mortgage balances to return to mid-2007 levels by the end of 2014."

Non-agency loans that are 90 or more days past due or in foreclosure fell 45% from their peak of $580 billion in January 2010. Agency loans saw severe delinquencies decline by 9% from $142 billion in January 2010 to $130 billion in May 2012.

Severely delinquent loans tied to home equity installment loans also fell 31% from their peak of $880 million in February of 2011 to $615 million last month.

Meanwhile, home equity revolving balances fell 18% from $680 billion in May 2009 to $560 billion in May 2012.

Total mortgage write-offs through the first five months of the year are down 28% from 2010 peak levels, Equifax said.

Home mortgage balances also are down 12.5% from record highs of $9.8 trillion, and total mortgage debt outstanding now equals $8.6 trillion.

Student loan write-offs also improved somewhat in the first five months of May, falling from $4.8 billion in May 2011 to $4.6 billion this year, according to Equifax data.

The total balance of existing student loans rose from $390 billion in September 2007 to $750 billion in May of this year. The exponential increase in student loan debt has been cited as one of the underlying causes of falling housing demand as younger generations saddled with student loans delay household formation.