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WASHINGTON -- U.S. Senate lawmakers on Saturday overwhelmingly passed a broad package of housing legislation, hoping to send a calming message to financial markets and voters amid the ongoing deterioration of the housing market and a growing number of bank failures.

Meeting in a rare weekend session, the Senate voted 72-13 in favor of the bill, which includes tax breaks for homeowners, a $300 billion program to refinance loans for struggling borrowers, and a dramatic rescue plan for embattled mortgage finance firms Fannie Mae and Freddie Mac. Other provisions include an increase in the federal debt limit to $10.6 trillion and long-sought reforms to the Federal Housing Administration.

The vote completes congressional action on the legislation, which is the result of months of political wrangling and negotiations between the House and Senate, Treasury Department, and other federal regulators. The House voted 272-152 to pass the bill on Wednesday.

It will now be sent to President George W. Bush, who the White House has said will sign the bill despite voicing earlier misgivings about certain provisions of the legislation.

Policymakers hope the wide-ranging bill will help invigorate a housing market that continues to collapse and has roiled financial markets worldwide. Data released in recent weeks reveal that home sales have hit a 10-year low and home prices continue to decline around the country. Importantly, the number of homeowners facing foreclosures continues to rise, raising the specter of vacant homes and neighborhood blight.

Foreclosure-tracking firm RealtyTrac said Friday that 740,000 properties received some form of foreclosure filing in the second quarter, a 14% jump from the previous quarter and soaring 121% from the second quarter of 2007. More breathtaking: One in every 171 households received a filing in the second quarter, and all but five of the nation's 100 largest metro areas experienced year-over-year increases.

"Behind every one of those numbers is an American family that is wondering if their Congress is going to do something for them," Senate Banking Chairman Christopher Dodd (D., Conn.) said during floor debate Saturday morning.

The omnibus housing package completed Saturday attempts to deal with the housing crisis on a number of fronts. It includes $180 million for "pre-foreclosure" counseling for cash-strapped homeowners, creates an affordable housing trust fund to increase the supply of rental housing, and would raise the size of loans eligible for purchase by Fannie Mae and Freddie Mac to 115% of the local area median home price, with a nationwide ceiling of $625,000 for loans.

The centerpiece of the legislation is a program of up to $300 billion of FHA-insured mortgages to help refinance cash-strapped borrowers into affordable loans. The program would rely on lenders voluntarily writing down the value of a distressed loan for the homeowner to qualify for the new FHA-backed loan, and in return borrowers would have to share future price appreciation with the federal government.

Lawmakers hope the program will help avert foreclosures, with Democrats estimating it could help up to 400,000 borrowers that now face defaulting on their loans. To encourage lenders to work with borrowers, the legislation also provides some legal protections for mortgage servicers and lenders who modify the terms of loans.

Also included is an emergency plan authored by Treasury Secretary Henry Paulson over the last two weeks to provide a federal backstop for Fannie Mae and Freddie Mac. Hatched in the wake of financial market concerns about the firms' solvency and capital, the plan would expand the $2.25 billion lines of credit the firms have with the Treasury, as well as allow the Treasury to take an equity stake in the government sponsored entities. Importantly, it also gives the Federal Reserve a "consultative" role to work with the firms' new regulator to ensure their safety and soundness.

It also includes tax relief for future homebuyers and current homeowners. Those buying a home between April of this year and through June of next year would receive a tax credit for 10% of the value of their home, up to $7,500, while current homeowners who do not itemize their tax returns would be able to deduct up to $1,000 for property taxes.

Other provisions include nearly $4 billion in grant money to state and local governments to buy up and rehabilitate foreclosed homes. Intended to avoid community blight in areas hard hit by foreclosure, the program directs that homes purchased through the program be offered to low- and moderate-income families.

Write to Michael R. Crittenden at michael.crittenden@dowjones.com²