"Not because of righteous things we had done" - this means humans had no redeeming quality (not just that they could not save themselves). Because of his mercy he saved us. He saved us through a rebirth and a renewal by the Holy Spirit. How nice it is to be reminded that we are a new creation. Old things have passed away- I've been born again! We are no longer slaves to sin- we have been saved from our imprisonment and are free to live and walk with God!