WASHINGTON -- House and Senate leaders have largely hammered out a compromise deal on a mammoth housing package that would permit the government to bolster Fannie Mae and Freddie Mac in an emergency, overhaul supervision of the housing-finance giants and allow the government to insure up to $300 billion in refinanced mortgages.

The deal comes after tense negotiations and is likely to remain a source of contention when the House of Representatives votes Wednesday. The nonpartisan Congressional Budget Office said Tuesday that a temporary measure to prop up Fannie Mae and Freddie Mac could cost the government as much as $25 billion. And despite repeated White House veto threats, lawmakers plan to include a $4 billion program that would allow local governments to buy and rehabilitate foreclosed properties.

It remained unclear whether the White House would follow through on veto threats, particularly because administration officials have actively lobbied in support of major provisions.

"It's a lengthy bill and we're reviewing the language," White House spokesman Tony Fratto said. "It's clear that the Democrats chose to play politics with the legislation, and unfortunate that they're doing it with legislation that will prevent systemic risk to our financial system."

The bill is expected to easily pass the House and will likely pass the Senate. Many Democrats and Republicans have said fears about the fragile state of the financial markets necessitate action, and this bill is likely to be Congress's most expansive attempt to address the nation's housing woes this year.

"Nobody in America will agree with everything that is in this bill, but I think enough people in America will find it acceptable, so it will go to the president's desk to be signed," House Financial Services Committee Chairman Barney Frank (D., Mass.) said.

Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and Sen. Richard Shelby (R., Ala.) issued a joint statement saying they were "optimistic about the prospects for this legislation." The Senate could vote later this week.

The deal includes several compromises. It would allow Fannie Mae and Freddie Mac to purchase loans of as much as $625,000 in high-cost areas of the country, a lower number than many House Democrats wanted but higher than some Senate lawmakers originally envisioned. It would also give the new regulator for Fannie Mae and Freddie Mac more control over the compensation packages received by top executives at either housing-finance giant, an unusual mark of government control over a publicly traded company.

Treasury Secretary Henry Paulson said in a speech in New York Tuesday that the stability of Fannie Mae and Freddie Mac was key to erasing uncertainty in U.S. financial markets. Hours later, he flew to Washington to meet with Senate Republicans for lunch to discuss the measure.

"I would rather not be in the position of asking for extraordinary authorities to support the GSEs," or government-sponsored entities, Mr. Paulson said in his speech at the New York Public Library. "But I am playing the hand that I have been dealt."

Fannie Mae and Freddie Mac were created by Congress decades ago and now are the main providers of financing for mortgages. Their exposure to the housing market's downturn has triggered fears about their solvency. Their stock prices plummeted this month before leveling off after Treasury and Federal Reserve officials announced a series of measures to keep the companies running if their positions worsened, a plan this legislation would endorse.

The $25 billion cost estimate from the CBO for the rescue plan was downplayed by Democratic and Republican lawmakers. "Everyone knows it's just a wild guess," said Sen. Jim DeMint, (R., S.C.). He called the plan a "huge gamble," but added that, "it's kind of: Guarantee a little now or pay a whole lot later."

Lawmakers plan to raise the public-debt limit as part of the legislation to $10.6 trillion from $9.8 trillion. Congress must vote to increase the limit to account for additional borrowing, something it is loath to do, although it would have had to take that step this year even without the rescue plan for Fannie and Freddie, Democratic aides said.

Officials from the Federal Reserve and the Office of the Comptroller of the Currency have already started discussing the financial conditions of the two firms in meetings last week with their regulator, the Office of Federal Housing Enterprise Oversight.

The Fed could soon be lending money to Fannie and Freddie, through actions it authorized earlier this month in parallel with Treasury. Commercial banks, many of which are overseen by the OCC, have direct exposure to Fannie and Freddie because of holdings in mortgage-backed securities and debt.

Ofheo director James Lockhart said his agency has shared financial information on the firms with a few "senior people" at the Fed and OCC. Mr. Lockhart said these efforts shouldn't cause any delay in the reporting of second-quarter results by the companies. Fannie and Freddie are expected to report those results by mid-August.

The CBO in its report said it is unlikely Treasury will put its plan into action. "The Congressional Budget Office estimates that there is a significant chance -- probably better than 50% -- that the proposed new Treasury authority would not be used before it expired at the end of December 2009," CBO director Peter Orszag said in a July 22 letter to House Budget Committee Chairman John Spratt Jr. (D., S.C.)

--Maya Jackson Randall, Sarah Lueck and James R. Hagerty contributed to this article.

Write to Damian Paletta at damian.paletta@wsj.com

Record Breaking Realty Deal by Indian

Senate to Weigh Housing Initiatives

Housing-Aid Measure Advances