If 2008 was the year of foreclosures and when "underwater" entered every homeowner's lexicon, 2009 will be the year of refinances and mortgage modifications.

In hindsight, the mortgage mess seems inevitable: Absurdly loose credit from 2002 to 2007 led to a bubble in house prices, scores of subprime lenders went out of business in 2007 as the risks caught up with them, and the misery spread to homeowners in 2008.

As home prices fell, millions of homeowners discovered that they now owed more than their houses were worth. They were unable to refinance and unable to sell. Delinquencies (defined as house payments at least 30 days late) soared.

Number of delinquent borrowers

In September 2007, roughly 1 in 18 borrowers were delinquent; in September 2008, the delinquency figure was about 1 in 14.

As the recession matures in 2009, more people are going to fall behind on their mortgage payments. At the same time, the federal government will be trying to hold down mortgage rates. And house prices will continue to fall. These three factors limit the smart moves you can make in 2009 with your mortgage and equity debt.

2009 smart moves: Buy a house
House prices have been falling in most places. In declining markets, people have trouble deciding whether to buy a house now or wait for prices to fall further. Instead of getting stuck on the buy-or-wait question, smart consumers consider other questions first:

3 questions to ask

• Have we put our financial house in order? • Have we saved enough for a down payment? • Is this the right time in our lives?

1. Have we put our financial house in order?
Not long ago, the best mortgage deals were offered to borrowers with credit scores of 720 or higher. Nowadays many lenders' thresholds have risen to 740. The necessity of a higher credit score is just one consequence of the mortgage debacle, and lenders have tightened their requirements in other ways, too.

During the boom years, many applicants merely stated their incomes without having to provide documentation. Those days are gone. Low-documentation and no-documentation loans are rare. Expect to provide paycheck stubs or tax returns (or both) to demonstrate that you earn what you say you earn.

The lender will want to see that your expenses are in line with your income. You might have to provide bank statements to show where the money goes. If a big chunk of your monthly income goes toward debts for credit cards, cars and college, the lender might constrain the amount you may borrow.