Some homeowners underwater on their houses—who owe more on their mortgages than their homes are worth—wonder what would happen if they were to stop paying their mortgages.

When lenders do not receive payments, the first action by the lender is to report the missed payment to the credit bureaus by the first day of the next month.  Sometimes this can happen in as little as two weeks from the due date, depending on when the payment is due.  Generally, this action will leave a negative mark on a credit report and decrease the homeowner’s credit score by as much as 200 points.

Because of the negative mark on the homeowner’s credit report, within the next 30 days, homeowners can expect their other creditors to take note of the late payment and to take action.  Credit card issuers may raise interest rates, lower credit limits, or close credit card accounts.  The borrower’s auto insurance, student loans, and other forms of credit also may change, as these are tied to the borrower’s credit score as well.

If the homeowner does not pay for 90 days, the lender likely will start calling, trying to persuade the homeowner to enter into a loan modification.  If a loan modification cannot be agreed upon between the homeowner and the lender, and the homeowner continues to miss payments, the homeowner likely will be served with a foreclosure notice.  After the foreclosure notice is received, the lender asks a court to issue a judgment against the homeowner, and a county sale is arranged.

Homeowners at risk of defaulting on their mortgages, or those who already are behind, should contact their lender immediately to work out a repayment plan and/or loan modification.

The home buyer tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline.  First-time home buyers will continue to receive a tax credit of up to $8,000, while existing homeowners will receive a credit of up to $6,500.  Existing homeowners will be eligible for the $6,500 if they have lived in their current residences for at least five years.  The bill also will increase the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively.  The purchase price of the home is capped at $800,000.

Under additional provisions in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 tax returns.  The bill maintains the provision that home buyers do not have to repay the credit, provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers.  According to a CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) research, nearly 40 percent of first-time home buyers surveyed said they would not have purchased a home without the federal tax credit, and approximately 70 percent said the tax credit was “the most important” or a “very important” factor in their decision to buy a home.

The unemployment rate in an area can help homeowners determine if their homes’ values is likely to rise.  As the unemployment rate rises, fewer individuals are capable of purchasing homes, decreasing the demand for homes, and driving down prices.  To find a city’s unemployment rate and whether it’s rising or falling, consumers can visit the Bureau of Labor Statistics’ Web site at http://www.bls.gov/lau.

New-home construction declined in September, as homebuilders pulled fewer permits for single-family homes, according to statistics compiled by the Construction Industry Research Board (CIRB).  Homebuilders pulled permits for 2,150 single-family homes in September, a decline of 2 percent compared with August and a 12 percent decline compared with September 2008.  CIRB also announced it is revising its forecast downward from 39,500 units to 37,700 units in 2009, the lowest total on record.

President Obama signed a congressional resolution to extend through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including many in California.  The resolution was part of a broader piece of budgetary legislation that will prevent a government shutdown. This effectively extends the higher conforming loan limits for Fannie, Freddie and FHA loans through 2010.