A new plan put in action by the President and Congress may help many homeowners struggling to make their payments. The plan calls for a reversal in tax policy that treats forgiven housing debt as taxable income on federal tax returns; allows homeowners who bought last year to deduct the amount of premiums they pay for PMI; and allows widowed spouses to exclude up to $500,000 in capital gains on the sale of a principal resident if the house is sold within two years of death. This is all great news for homeowners.

From AccountingWeb:
Amid daily headlines of a worsening housing crisis, debt-burdened homeowners are looking to two pieces of congressional action that could ease the pain. Monday's headlines stated that new home sales fell by 26 percent last year, which is the biggest drop since 1963, the U.S. Department of Commerce says. And last week's headlines said sales of previously owned single-family homes took a dive - the biggest annual drop in 25 years. Meanwhile, about a quarter of all subprime mortgages are in default. As more and more homeowners face the very real prospect of foreclosures, Congress last month passed the Mortgage Forgiveness Debt Relief Act. Also, Congressional Democrats say an economic stimulus package - centered on $100 billion in tax credits for about 117 million families - is headed quickly for a vote. They aim to get the package to President Bush by Feb. 15.