The Mortgage Forgiveness Debt Relief Act is a law that was passed by the United States Congress in December 2007. Because of the growing economic crisis, including millions of foreclosures around the country, it became necessary for the federal government to intervene. Typically, when a lender forgives part of a debt that is owed, that portion is taxed as income to the borrower. The Mortgage Forgiveness Debt Relief Act allows lenders to forgive that extra amount owed with no adverse financial consequences to the borrower.