The Mortgage Forgiveness Debt Relief Act and Debt Cancellation was extended through 12/31/2013. Because this act has been extended a couple times it may not be extended again so homeowners need to act quickly to ensure their tax liability is minimized.
From IRS.gov:
“The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”