RISMEDIA, July 30, 2008- (MarketWatch/MCT/ RISMedia) - The Senate cleared a massive housing bill on Saturday designed to prop up the struggling U.S. housing market and put in place a U.S. backstop for giant mortgage-buyers Fannie Mae and Freddie Mac.

Senate lawmakers approved the bill, which contains billions of dollars in loan guarantees, a tax break for first-time home buyers and many other provisions, by a vote of 72-13.

The bill now will go to President Bush, who has indicated he will sign it despite objections about a provision directing $4 billion in emergency aid to local communities to buy and rehabilitate foreclosed homes.

The measure, approved during a weekend session in the Senate, allows homeowners who cannot afford their monthly payments to refinance into government-backed loans. The bill also offers temporary financial help to Fannie Mae and Freddie Mac.

The bill won approval in the House on Wednesday by a vote of 272-152, overcoming Republican objections about extending an unlimited line of credit to the two government-sponsored mortgage-finance titans.

The bill gained momentum as worries about the health of Fannie Mae and Freddie Mac spread. Some House and Senate Republicans were skeptical of a plan unveiled by Treasury Secretary Henry Paulson on July 13 that extends a line of credit to the two and allows the government to buy their stock if necessary.

Paulson’s plan is included in the bill passed by the House and the Senate, and he praised its passage Saturday.

“I want to commend the Senate for moving swiftly to pass important GSE legislation that will provide temporary authorities to give confidence to markets and will create a strong, independent regulator better able to address the risks these enterprises pose,” Paulson said in a statement.

“As the President has said, we are disappointed that the legislation includes extraneous provisions that can hinder our efforts to get through the housing correction quickly,” he said. “But it is of the utmost importance to our market and economic stability that the GSE portions of this bill become law. These components are orders of magnitude more important to turning the corner on the housing correction.”

Reactions within the industry have been mostly positive as well.

“The mortgage mess is so big, with some many culprits and so many victims, there is no perfect solution, but, by all accounts, this seems like a step in the right direction,” stated Saul Klein, president/CEO, InternetCrusade and CEO of Point2 Technologies.

After the bill passed the House last Wednesday, NAR president Dick Gaylord praised the effort, urging that it be finalized and passed into law immediately.

“Realtors® are in the business of building communities, and our 1.2 million members understand that this legislation will go a long way in helping people buy and keep their homes,” says NAR President Dick Gaylord. “We look forward to prompt Senate action to finalize this bill, helping ensure that every American who can afford to own a home and wants to do so will have the opportunity and that everyone who responsibly owns a home is able to keep it. This bill must get to the president quickly, and we urge him to act immediately to sign it into law.”

David Charron, president and CEO of Maryland-based MRIS, the largest MLS in the nation, noted that the bill gives Realtors an opportunity to reach out to homeowners.

“First of all, this action bodes well for the consumer,” Charron said. “Realtors may ultimately see benefits but only after the consumer understands what these benefits are. This decision is a perfect opportunity to for the real estate professional to establish a meaningful and valuable conversation with homeowners.”

Added Mike Parker, a principle at the Blackwater Consulting Group, which specializes in online marketing for real estate professionals: “The housing bill is a very good thing for our industry for three primary reasons: It sends an unmistakable message to the American people that the government is not going to allow chaos to proceed; it contains a significant tax credit for first time buyers that will spur home buying by that segment and it removed the need to foreclose on many homeowners; many will now be saved. In a macro sense, there were better solutions, but we got this one. I see the glass as half full.”

With home prices down 16 percent from their 2006 peak and foreclosures at a record high, lawmakers have been working on the housing bill for months in an effort to help homeowners and the overall market.

The bill contains a tax break of as much as $7,500 for first-time home buyers, creates a new regulator to oversee Fannie Mae and Freddie Mac and allows the government to insure up to $300 billion in refinanced mortgages.

Shares of both Fannie Mae and Freddie Mac have seesawed in recent weeks as they faced concerns about their capital levels.

House Financial Services Committee Chairman Barney Frank, D-Mass., said the overall bill deals with a housing crisis brought about by “bad decisions and inaction and malfeasance from years before.”

The rescue plan would extend an unlimited line of credit to the two mortgage-finance giants for 18 months and give the Treasury the authority - also for 18 months - to buy Fannie and Freddie shares if the Treasury deems the companies’ capital to be inadequate.

Some lawmakers have been skittish about the administration’s plan for the GSEs, calling it a “blank check” that potentially puts U.S. taxpayers on the hook.

But opponents of the bill acknowledged that they didn’t have enough allies to block the backstop for the government-sponsored enterprises.

A Freddie Mac spokesman recently praised the bill in a statement.

“Passage of this bill sends a helpful signal of confidence to housing markets and investors. Freddie Mac will continue doing its part to help the economy by raising private capital, helping put families into homes through sound underwriting, and helping troubled borrowers avoid foreclosure,” Doug Duvall said.

Fannie Mae CEO Daniel Mudd said “the legislation should reinforce confidence that the GSEs will be able to serve the housing finance system now and in the future.”

On Tuesday, the Congressional Budget Office said the plan could cost the government up to $25 billion. However, the same report said chances are better than 50 percent that the government wouldn’t need to help the companies out.

RISMedia Online Managing Editor Beth McGuire contributed to this report.