Fewer Borrowers Are Behind on Mortgages, but for How Long?

4 ways to pay off your mortgage earlier

The number of homeowners behind on their mortgages has now fallen for four straight quarters to the lowest rate in four years.

At the end of last year, the delinquency rate took its deepest dive since things began improving in 2010, falling 14 percent from a year ago, according to a new report from Transunion. Thirty-seven states and the District of Columbia saw improvements. Unfortunately, these improvements may not last.

(Read More: Americans Are Tapping Into Home Equity Again)

"The declines in the mortgage delinquency rate will likely be muted for the foreseeable futures as the foreclosure process in some states can take more than 1,000 days," notes Tim Martin, of TransUnion's financial services business unit. "It is not clear yet, but recently announced regulatory rules related to mortgage servicing may tend to slow down this process further."

Delinquencies dropped 6 percent annually in 2011 and 7 percent in 2010. This after jumping over 50 percent in each of the previous two years. The trouble is not with new loans but with a long legacy of troubled loans from the housing boom. While these loans make up 60 percent of mortgages outstanding, they account for 90 percent of loans gone bad. Attempts at loan modifications as well as long delays in the foreclosure process have kept these loans stuck in a bloated pipeline.

There are borrowers today that have not made a mortgage payment in several years but have still not lost their homes. New laws in California and Nevada slowed the foreclosure process considerably, while New York and New Jersey are still facing huge backlogs of bad loans that will take years to make their way through the states' court process.

(Read More: New Housing Fears: Home Prices Are Rising Too.)

Nationally, the mortgage delinquency rate now stands at 5.19 percent, down from 6.01 percent a year ago, but still far from the historical average of around one to two percent. While loans made in the past few years, using far stricter underwriting, are faring very well, there is a concern that thousands of mortgage modifications made during the same time will default again. Negative equity, while improving, continues to plague millions of borrowers and makes selling the home impossible. Should these borrowers need to move, they will likely have to default on their home loans.

(Read More: Why Home Builders Won't Drop New Home Prices,)

—By CNBC's Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com