The Mortgage Forgiveness Debt Relief Act of 2007 creates a three-year exception (from 2007, through 2009) to the debt forgiveness rules so that affected homeowners won't have to pay federal income taxes for debt forgiveness on up to $2 million of troubled loans used to acquire their principal residence.

In addition, the new law allows taxpayers to take an itemized deduction for premiums paid or accrued after 2006 and before 2011, on qualified mortgage insurance issued for mortgages used to acquire the taxpayer’s principal residence. The law applies only to contracts issued after 2006, and is subject to phase-out for taxpayers with adjusted gross incomes between $100,000 and $110,000.