More than 2 million homeowners are in trouble with their debt payments. And a new study shows that more than half of homeowners who become delinquent on their loan payments ultimately go into foreclosure.

However, just for those beleaguered homeowners, the new Mortgage Forgiveness Debt Relief Act of 2007 is supposed to provide some relief to those who sell their homes short; that is, sell for less than the mortgage amount.

Prior to the new law being signed, if your lender agreed to a short sale, the IRS considered the difference between what you sold for and what you owed taxable income. So, just as you were starting to move on with your life, having lost just about everything, the following April 15 you’d have owed the IRS income tax on what amounted to phantom income.

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