Are homeowners in some parts of the country more likely than others to pay their mortgages on time? If you had to guess where the scrupulously on-time borrowers live, would you pick states with traditionally thrift, conservative financial stereotypes like New Hampshire, Vermont or the Midwest?

Would you perhaps also guess that some of the states with the highest prices, highest housing appreciation rates and highest uses of interest-only and option ARM loan programs might have the highest incidences of late and missed payments? After all, aren't home buyers in such markets -- think California, for example -- stretched to the limit to purchase their high priced homes in the first place?

Well guess again. California homeowners may have to deal with sky-high prices and monstrous mortgage bills, but they pay their loans on time more reliably than homeowners in all other states but one -- high-cost, high inflation Hawaii. New Englanders tend to be relatively dependable with on-time mortgage payments, but they are not among the leaders.

All these home mortgage performance factoids can be gleaned from the latest national delinquency and foreclosure survey by the Mortgage Bankers Association of America. The quarterly study covers almost 40 million active mortgage loans and is considered authoritative on the subject.

At the end of the second quarter of 2005, Hawaii, where housing appreciation soared by almost 26 percent last year, just 1.56 percent of all homeowners with mortgages were even slightly in arrears. That compares with a national average of 4.3 percent. California, where median home prices are stratospheric and rose by another 25.2 percent last year, had a late payment rate of just 1.88 percent. New Hampshire and Vermont, by contrast, had late payment rates of 2.95 percent and 2.5 percent respectively.

Where are homeowners most likely to fall behind? The highest rates of late payments and foreclosures are in states that have relatively slow-rising home prices, and slow-growing economies with above-average unemployment. Among the slowest payers: Mississippi borrowers, whose delinquency rate at mid-year stood at 8.5 percent. Louisiana was next at 6.9 percent, followed by Indiana (6.7 percent), Tennessee (6.32 percent), Texas (6.31 percent) and Ohio (6.13 percent).

Foreclosures generally are the highest in the Rust Belt states where factory layoffs have been extensive and unemployment rates intractably high. Though the national average rate of foreclosure was 1 percent as of mid-year, Ohio homeowners had a 3.3 percent rate, followed by Indiana (2.8 percent), Kentucky (1.9 percent) and Mississippi (1.7 percent). (For further reading see links below - number 5)

BANKRUPCY FILINGS SEEM TO UP (AGAIN):

FILINGS INCREASE AHEAD OF BANKRUPCY CHANGES - By Lori Haugen - September 2005

FAIRMONT -- After Oct. 17, declaring bankruptcy will be more complicated and more expensive. And it may be more difficult to find an attorney to help you. Congress last spring adopted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which put up new hurdles and costs for consumers to erase their debt. In response, many debt-ridden consumers across the country are scrambling to declare chapter 7 bankruptcy before that deadline. Under the new rules, a means test will cause more people to file for chapter 13 bankruptcy, meaning they will be required to pay back their debt over time, instead of having their debt forgiven under chapter 7. Those filing bankruptcy after Oct. 17 will also be required to undergo counseling, "to work out their debt issues before filing," said David Frundt, an attorney with the Blue Earth law firm of Frundt and Johnson. And after filing, people will be required to participate in a financial management course, to discourage any repeat bankruptcies. Frundt said it is not clear yet who will be doing the counseling -- the government has yet to release its list of approved credit counselors.

Minnesotans declare bankruptcies at a lower rate than most Americans -- the state ranks about 40th out of the states, with about one out of every 105 households filing for bankruptcy, according to recent statistics. Terry Viesselman, who practices bankruptcy law at the firm Viesselman and Barke in Fairmont, said his filings right now are four times the normal rate. They're flooding in, Viesselman said. I'm working on one right now. (For further reading see links below - number 6)

THE FINAL POINT OR CONCENSUS

We believe the US real estate market cannot continue as it has been in terms of price increases (as no market goes up forever), and we also believe there are a number of converging issues that will force the US Central Bank to raise interest rates in the near term (next 18 months).

In conclusion, higher interest rates, at least in the short-term, will result in a negative impact on the housing market. This has always been the case. However, rates will not shoot up radically, but rather they will be brought up slowly. While the US National Association of Realtors expects an even better or banner year in 2005 for home sales activity - the long-term outlook for certain is a correction in the US housing market. It is not a question of if, but exactly when.

Many of our European clients often say we focus too much on US issues and not enough on Europe, so to be fair, we can make some observations about real estate prices in Europe as elsewhere as well. Generally speaking, bank loans for real estate purchases are much more restrictive in terms of down payment minimums, etc. outside of the US, and in many European nations in particular (to contrast the circumstances in one so-called modern, developed market with another). Better stated, while it is very true that real estate prices have risen exponentially in Europe as well for housing, it is also true that on average, Europeans have much more equity in their own homes as well. The reason for this is are bank lending practices in many of these markets.

THE ACTION PLAN

Why make mention of these issues and what can you do about it? Well, if you currently live in North America or Europe, NOW may be the time to think about taking out inflated profits and cashing out of the local real estate market where you are.

If you do have some built up equity and were planning to sell your home or property within the next two years - it might be a good idea to do so today, rather than later. If for whatever reason you would prefer not to do this, or are not ready to consider moving or retiring for some time, another idea might be to take a home equity loan at a currently low fixed rate, and use those funds to invest or purchase elsewhere (see below). Of course do not so this if you cannot afford the monthly payments. But if you can, the US national average for a 15-year fixed mortgage is currently about 5.75 percent. In two years, this may look like a bargain if rates go back up to 8 percent or more.

Let us say you do sell your home or have the cash equity in hand - what do you do? The idea should be to buy low and sell high, and not to reinvest those funds back into another inflated local property. Where do you find these realistic real estate buys? Namely in those very places or countries where easy credit has not pushed up prices too far too fast and also whereby prices in general are more reasonable - places where you get more house for the money. There are many markets that fit this bill and of course it all depends upon where you might want to retire to as a goal as well.

If the Caribbean is your fancy, then the Dominican Republic still remains to be one of the best buys around. Comparing costs for beach front or other kinds of properties, it is still the case that you can find oceanfront lots for about US$20 per square meter. Some ocean or beach condominium projects offer one and two bedroom units starting at about US$78,000 or so. If you prefer to live in a modern urban setting, then 1,500 square foot and larger new homes or apartments can be easily be found in the US$120,000 range.

If you prefer to live someplace other than on a Caribbean island, then you might want to investigate Uruguay, Brazil or Argentina. These markets offer still very reasonable prices for real estate in comparison to current prices in Europe or North America. And in addition, just as in baseball, always bet on the team in last place (it has nowhere to go, but up). Meaning, many people might think this idea involves risk or might feel this is an uncomfortable idea - buying a property in what some might call an emerging market. However, that is the entire point, and these countries are not so backwards as you might tend to believe either. Cable television with many channels in English, modern and fast Internet service plus stores or businesses offering many of the products or services you have right now are all often available. Plus, the idea is that these markets are inexpensive and a good buy now, but they will not stay that way forever. Buying or owning a property in another country that is not tied in economically or otherwise to the events in your current country is a hedge in and of itself. Then again, buying low has always been the smart way to make money in real estate anyway, regardless of where it is located. So, if your goal might be to retire abroad in a country with a lower cost of living anyway, the idea of cashing out of the expensive market and buying in to the low cost market does make sense. Also, there are other factors to consider also, such as the local structure of the economy and the society. Are these countries poised for a more prosperous and tranquil existence going forward in comparison to where you are living at the moment? They might be.

Let us say you are not interested in purchasing property with the cash you have? Some other ideas certain could include the purchase of gold, which has always proven well in an inflation environment. In addition, more stable currencies of other countries that have a greater prospect NOT to devalue in the near future, or in the least will maintain their value relative to other world currencies can be considered if you wish remain liquid with your holdings.

Regardless of what you decide to do, at least make an informed decision. Using local news and the rhetoric of politicians alone will not give you the information and answers that you need. The facts, statistics and other information can be found in the public domain if you take the time to find it. Also, remember that history does indeed repeat itself. Inflation, deflation, and other kinds of economic problems have all happened before many times over. In addition, the proof of what politicians have done before is all documented, along with the results. However, the other unfortunate truth is that politicians (and people) fail to learn from the results and continue to repeat the same mistakes time and time again. Knowing this, and knowing that economics is all cause and effect can help you predict where things are going, and whether or not the powers that be are taking steps to improve (or not) your own personal situation. If not, then you do have a choice, and staying to suffer the consequences is not one of them.