The limit for insured mortgage loans is about to be lowered even further. No longer will the Fed be insuring higher-end mortgages. The Federal Housing Administration and both Democrats and Republicans agree that there is no right to a Federally backed mortgage if the mortgage is beyond the national average. In other words, if you want to live in a very expensive home, the lender will be free to make that high of a mortgage, or not, without the assistance of the Fed.

What does this mean to the average San Diegan?

In San Diego, this means the housing crunch will no longer be limited to homes valued at under $500,000. The higher-priced homes in pricey neighborhoods will now feel the pressure as well. Prices in those areas will drop considerably as the ability to purchase those homes will be less because the lenders will be very cautions about lending large amounts for mortgages. Additionally, the cost of lending in the form of interest rates will also go up. This will result in more higher-end homes going into foreclosure, and the ability to purchase or refinance those homes will be lessened.

More bad news: More affluent home buyers are about to get hit with watching their home value drop, and new borrowers will be required to come up with down payments of 30 percent or more while showing greater assets, higher credit ratings and lower debt-to-income ratios.

It may be a great time to stay in the smaller home that you now own and wait to upgrade to that larger, more expensive home.

First, the mortgage lenders now have added the staff to complete the foreclosure process to sale. Meaning that more homes are being sold at auction.

Secondly, this has motivated homeowners who are struggling with their mortgages to sell before they go into foreclosure in an attempt to get the best price for their property.

Home sales are up as is the number of building permits, which clearly indicate a slow recovery. Interest rates are at one of the lowest rates which have helped boost home sales.

The nationwide trend may be a little different, however. The governmental plans to assist home owners have failed miserably. There is no other way to state it. The Federal Government has a complete inability to watch over mortgage lenders to ensure they comply with the regulations and help distressed property owners. Mortgage lenders are unmotivated to make the process timely or efficient. This only leads to a completely frustrating experience.

The trend is called “Strategic Default” and it effects even the most reluctant and proud homeowner. Once they have concluded that the existing mortgage is not going to be adjusted to make the home affordable, they plan the timing of the foreclosure. Often times this planning involves the school year, graduation, work relocation, etc.

The major question becomes “How much longer can I remain in my house until I am forced out?” This is where the engagement of a professional is so critical. Once the move becomes a reality, the timing of the move becomes the focus.

As an article about strategic default practices said, severe negative equity is a massive and corrosive problem across the country. If the value of the home is far less than the balance of the primary mortgage, then there is negative equity. If there is a second mortgage on the home, then the negative equity is far more acute. The problems that are associated with a second mortgage can be even more devastating as the second mortgage holder may, and probably will, pursue the collections of balance of their loan after foreclosure. This could also result in a heavy tax liability in the form of a capital gain for forgiveness of debt.

It is critical to engage the services of a professional San Diego bankruptcy firm early, long before the foreclosure begins and long before the liquidation of any retirement accounts.

But as this article points out, the recession has hit men and women alike, coming down hardest on families and couples. When one paycheck in a two-paycheck home ceases to exist, many couples — perhaps almost all couples — will struggle. And combine the job loss with other challenges of the economy such as credit card changes and the drop in the housing market, and you’re definitely in trouble. Thus, this “mancession” left plenty of women in financial hardship as they had to struggle to pick up extra jobs to make ends meet.

Another recent analysis revealed that although there are signs that the jobs are coming back, only one in five of the people who have been unemployed for more than six months have recently found jobs. That means that many of the people who were laid off during the “mancession” are still living without an adequate income.

The key to keeping ahead of the debt and the accompanying stress is to be proactive about taking charge of your finances. No matter when you were laid off, you can still follow the guidelines I laid out in “Four Things to Do As Soon As You Lose Your Job.” And, as always, the very best advice if you get laid off or are having trouble paying the bills is to come in for a free consultation with a San Diego Bankruptcy Lawyer.

The tax break preventing the issuance of a 1099 cancellation of debt is no longer available starting tax year 2009. Previously, for tax year 2007 and 2008, mortgage companies who held second mortgages were not allowed to issue 1099s for cancellation of debt on short sales or foreclosed primary residences. Now they can, do, and will in the future.

As a result, the State of California will be assessing an income tax based on the amount of debt forgiven. A huge tax bill may result, depending on the net loss. Further, the holder of that mortgage can pursue collections of the total amount of outstanding balance. The biggest losers will be homeowners who have lost their residences.

The best way to not only avoid the tax liability but to prevent collections of the deficiency balance is to file a bankruptcy.

Since foreclosure is an expensive process, many lenders have already been willing to work with homeowners to modify loans. Obama’s plan will pay mortgage companies to reduce monthly payments and provide incentives to both borrowers and servicers to keep the loans currents, and we’re all waiting to see if this prompts some true home-saving changes in this down economy.

Obama’s plan has the potential to help hundreds, perhaps thousands, of San Diego homeowners catch their breath long enough to get back on track. But the problem I see most often is that many people wait too long to take action when they start to get into financial trouble. They come to me at the very last minute, when they have creditors calling at all hours and foreclosure notices in the mailbox. If they had come in when things started to go bad, I could have saved them months of stress.

I strongly recommend that if you’re already in financial trouble, don’t wait to take action. Perhaps your household income has decreased because of a layoff, or maybe you’ve encountered a medical emergency and unexpected bills. You may be behind in your mortgage payments or other bills, and the stress of your financial outlook is keeping you up at night. A consultation with a debt reorganization professional will help you understand your options for getting back on track NOW, rather than trying to wait until Obama’s program kicks in.

Are you ready to consider bankruptcy? Ask for a Free Bankruptcy Document Organizer and Consultation.

Our clients who are facing foreclosure are frequently victims of unforeseen circumstances. They may have suffered a serious illness and been unable to work. The house may have required essential and expensive repairs. They may have been victimized by predatory lenders. They may have borrowed money against a home that is now worth less than they owe. We can stop foreclosure proceedings and give clients a chance to address their financial problems.

Learn More About Foreclosure – Contact Our California Law Offices

To learn about your options in foreclosure, schedule a free consultation with our California law firm. Call our offices at 1-888-712-5978.

Alternatives to Foreclosure

When we submit a bankruptcy filing (usually a Chapter 13), we can stop the foreclosure. We can also halt creditor harassment and threatening notices and give our clients time to get back on track.