The percentage of mortgages in default more than 60 days in Fannie Mae’s portfolio have fallen to the lowest level in two years, another sign that defaults are slowly but steadily declining as more homeowners pay their mortgages on time.

Serious defaults of conventional single family mortgages fell to 4.08 percent in June and July, compared to 4.82 percent in July 2011. Serious defaults peaked in February 2010 when they reached 5.59 percent of all mortgages in Fannie’s portfolio. Currently Fannie holds about $728 billion worth of mortgages in its portfolio.

Government-controlled mortgage company Fannie Mae said Friday that its second-quarter loss widened as it continues to seek loan modifications to help reduce defaults amid the ongoing difficulties in the housing and mortgage markets.

Earlier this month Fannie Mae announced it will ask for $5.1 billion in funds from the Treasury to reduce its losses by reducing defaults through loan modifications for borrowers having trouble paying their mortgages.

Fannie Mae said that it aims to lower its credit losses while keeping as many families as possible in their homes and protecting property values.

“We remain the largest source of liquidity for the U.S. mortgage market, and we are committed to creating long-term value by helping to build a stable, sustainable housing market for the future,” President and CEO Michael J. Williams said in a statement at the time.

Fannie completed more than 80,000 single-family loan workouts in the second quarter, with more than 59,000 of them involving loan modifications, repayment plans and forbearances.

Fannie’s rescue has been one of the most expensive government bailouts. It has received nearly $100 billion from the Treasury to stay afloat.