California and New England continue to stand out as trouble spots. But, for the most part, economists are struck by the surprisingly small regional variation in late payments on home loans in the latest Mortgage Bankers Association survey.

The consistency can be attributed to an economy that is almost uniformly strong, said Mark Zandi, chief economist at Regional Financial Associates. "Almost always you can find a region in recession," Mr. Zandi said. "That is not the case today."

In the first quarter, late payments rose in three regions of the country and fell slightly in the North-Central, according to the survey released last week.

The strong economy and its salutary effect on mortgage delinquencies was clearest in the nation's North-Central region, where late payments fell to 3.88% in the first quarter, down 0.02% from yearend 1996.

The region includes states, such as Illinois, Michigan, Minnesota, and Ohio, where home prices have been positively bullish. When home prices go up, so does the borrower's equity-making it more likely that the homeowner will try to make payments even in hard times.

Home prices have risen from 1996 figures at a 10% rate in Michigan, 6% in Ohio, and 5% in Illinois and Minnesota, according to a repeat sales index maintained by Fannie Mae and Freddie Mac.

Midwest home prices are fueled by lots of new well-paying jobs in high- tech, construction, and the financial services sectors; overtime in the booming auto industry; and the flush feeling induced by the strong stock market, said Mr. Zandi.

"Wages have pushed up, people are working a lot of hours, and the value of stock in their 401(k)s" has gone up, Mr. Zandi said. "They're feeling wealthy." A big portion of the added income has gone into the housing market, he said.

David Lereah, chief economist at the Mortgage Bankers Association, is still troubled by mortgage credit quality in two areas-California and New England.

In California, 4.08% of home loans were late in the first quarter, up from 3.98% a year ago, according to the MBA survey.

In the New England states-Maine, New Hampshire, Vermont, Massachusetts, Connecticut, and Rhode Island-3.52% of home loans were late in the first quarter, up from 3.44% a year ago. These numbers are not seasonally adjusted.

Those regions may be turning the corner, but still aren't keeping pace with the rest of the country, Mr. Lereah said.

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