What do I do if I had a substantial income in 2007 and no income in 2008. I did not apply for unemployment. I lived off my savings. I have a mortgage with interest to deduct etc.

You must file tax return if your income exceeds the filing requirement.
Read Your U.S. Tax Return: 2008 Filing Requirements for Most Taxpayers (http://taxipay.blogspot.com/2008/10/2008-filing-requirements-for-most.html)