WASHINGTON -- The U.S. Senate passed an extensive package of housing legislation Friday, reacting to the continuing erosion of home prices and growing foreclosures by taking their most aggressive step yet to address the housing crisis.

Despite the vote, which came after weeks of political wrangling, House and Senate lawmakers will still need to overcome a number of impediments before President George W. Bush can sign the bill into law.

Senators voted 63-5 in favor of the package of tax relief for homeowners, changes to the Federal Housing Administration, and a $300 billion program to refinance mortgages headed toward foreclosure into affordable loans.

The legislation also overhauls regulation of faltering mortgage-finance firms Fannie Mae and Freddie Mac. The two companies have seen their stock prices drop precipitously this week because of solvency concerns, and lawmakers hope the creation of a new regulator with broader authority over the companies boosts market confidence.

Senate passage now kicks off a round of negotiations with the House of Representatives, with lawmakers hopeful they can reconcile competing versions of the bill. The two measures contain a number of differences, including nearly $4 billion in funding for community development block grants, provisions dealing with Fannie Mae and Freddie Mac's loan portfolios, and limits on the size of loans the two government-sponsored enterprises can purchase.

The centerpiece for both bills is a program offering up to $300 billion of FHA-insured mortgages to help refinance struggling 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 500,000 cash-strapped homeowners. Foreclosure tracking firm RealtyTrac Inc. reported Thursday that one in every 501 U.S. households received a foreclosure filing during the month of June, an increase of 53% over June 2007.

Other foreclosure-prevention and housing-related efforts in the Senate bill include $150 million in additional funding for housing counseling, $10 billion in additional mortgage-revenue bonds, and a housing trust fund to be funded by Fannie Mae and Freddie Mac.

Senate Banking Chairman Christopher Dodd (D., Conn.) said his hope is that lawmakers can deliver the long-sought housing legislation to President George W. Bush by next week. Sen. Dodd said he and House Financial Services Chairman Barney Frank (D., Mass.) have spoken frequently about future steps they need to take with the legislation.

"If they send something back, I'm told by Congressman Frank it'll be some tweaks, as he's called it, and my hope is that we can deal with those quickly," Sen. Dodd said at a press conference.

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