Yes, you will be covered by the Mortgage Debt Relief Act of 2007 if you used this home as your primary residence. Hence, any debt that remains unpaid and is cancelled by the lender will not be included in your income.
Once the debt is cancelled, legally you do not owe it and hence do not need to make any payments to the lender thereafter.
Here is a link to the details of the Act
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.