Congress just approved a tax-relief bill to help families that have had a portion of mortgage debt forgiven through foreclosure, a short sale, or a loan restructuring.   In the past, homeowners who couldn't make mortgage payments were sometimes given a huge tax bill in the form of a 1099.  The "forgiven debt" was treated as taxable income.   The legislation is retroactive to Jan. 1, 2007 and is scheduled to retire at the end of 2009.  Lawmakers believe that this is a temporary problem so only a temporary solution is needed.   President Bush also signed a bill to extend a tax deduction for private mortgage insurance through 2010 and is retroactive to mortgages issued after Dec. 31, 2006.   Home buyers who put less than 20% down on a home loan have to pay mortgage insurance to protect lenders in case of default.   The tax deduction will probably amount to a savings of about $350/year and can be deducted on the 2007 taxes.   A full deduction is limited to homeowners with adjusted gross income of $100,000 or less.  

Note:  Foreclosure were up sharply in the third quarter of 2007.