A 1099c will be given if homeowner vacated the property or it is considered a investment property or vacation home. The accountant will have to determine if there can be an agreement to change 1099C filing.
First Weber Group
Certified Distressed Property Expert
My understanding of it is (after reading from the IRS website) it falls under the The Mortgage Forgiveness Debt Relief Act of 2007, which provides relief for debt forgiven in calendar years 2007 through 2012. Properties that qualify are the principal residence if the balance of their loan was $2 million or less; debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
The mortgage companies will likely still send 1099s but the taxpayer needs to complete Form 982 to exclude the debt from their taxable income.
I refer clients to the IRS website and also advise them to contact a CPA.