I received a 1099-A in CA. The fair market value is less than the balance of principal outstanding. Should I wait for 1099-C to file income tax return? What should I do now on the income tax return? Will the bank go after me the debt or send me a 1099-C later?

Wait for 1099-C. Debt cancelled is your income.

1. You may have to report sale on Schedule D (Form 1040).
2. Any debt canceled is your income.
3. If you lived in the house for two years and owned it for two years in last 5-years, you may be eligible to exclude gain of up to $250,000.
Read about foreclosure or repossession Your U.S. Tax Return: Foreclosure or Repossession of Main Home (http://taxipay.blogspot.com/2008/08/foreclosure-or-repossession-of-main.html)

There is a process by which you can CANCEL the imputed income from the cancelled debt on a foreclosure. The home in question must be your primary home and the foreclosure must be on your FIRST mortgage.

Contact a local tax professional. He/she should be aware of how to apply for the cancellation.