WASHINGTON – It took fears of a market collapse to push President Bush and Congress to compromise on sweeping election-year changes in the nation’s housing and mortgage rules.

The package the Senate approved Saturday and sent to the White House could benefit as many as 400,000 homeowners. It also tacks on an $800 billion increase – to $10.6 trillion – in the legal limit on the national debt.

It includes $15 billion in tax cuts, including a significant expansion of the low-income housing tax credit and a credit of up to $7,500 for first-time home buyers for houses purchased between April 9, 2008, and July 1, 2009.

U.S. Sens. Olympia Snowe and Susan Collins, both Maine Republicans, voted in favor of the bill.

Bush said he would sign it promptly, despite reservations.

For people who cannot afford their monthly payments, the bill lets them refinance into more affordable government-backed loans rather than losing their homes.

Regarded as the most significant housing legislation in decades, the plan also offers a temporary financial lifeline to Fannie Mae and Freddie Mac, whose losses have sparked investor fears, and tightens controls over the two government-sponsored businesses.

What began as a showdown between the White House and the Democratic-led Congress over how far the government should go in rescuing homeowners evolved into a bipartisan effort that could be the last such compromise before Bush leaves office in January.

In a Saturday session, the Senate voted 72-13 to send the bill to the president; the House passed it Wednesday.

Bush had withdrawn his veto threat earlier in the week over $3.9 billion in neighborhood grants. He contended the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.

Many Republicans, particularly those from areas hit hardest by housing woes, were eager to get behind a housing rescue as they looked ahead to tough re-election contests. Treasury Secretary Henry M. Paulson’s request for the emergency power to rescue Fannie Mae and Freddie Mac helped push through the measure. So did the creation of a regulator with stronger reins on the government-sponsored companies, as Republicans long have sought.

Democrats won cherished priorities in the bargain: the aid for homeowners, a permanent affordable-housing fund financed by Fannie Mae and Freddie Mac, and the neighborhood grants.

The legislation takes several approaches to curing the ailing housing market.

It aims to spare an estimated 400,000 debt-strapped homeowners, many of whom owe more than their houses are worth, from foreclosure by allowing them to get more affordable mortgages backed by the Federal Housing Administration.

The FHA could insure $300 billion in such mortgages, which would be available to homeowners who showed they could afford a new loan. Banks would first have to agree to take a large loss on the existing loans in exchange for avoiding an often-costly foreclosure.

The plan also is designed to relieve a broader credit crunch that has taken hold because of rising defaults and falling home values. To free up safer and more affordable mortgage credit, the bill permanently would increase to $625,000 the size of home loans that Fannie Mae and Freddie Mac can buy and the FHA can insure. They also could buy and back mortgages 15 percent higher than the median home price in certain areas.

The measure tries to prevent blight in areas hardest hit by the housing crisis, where waves of foreclosures have left properties sitting abandoned, dragging down property values and ruining neighborhoods. It sends $3.9 billion to such neighborhoods to buy and fix up foreclosed properties.

It goes far beyond addressing the current crisis, however.

The legislation overhauls the Depression-era FHA. It requires lenders to show how high a borrower’s payment could get under the terms of his mortgage. It provides $180 million in pre-foreclosure counseling for struggling homeowners.

The Treasury Department gains unlimited power, until the end of 2009, to lend money to Fannie Mae and Freddie Mac or buy their stock should they need it. The Federal Reserve takes on a new “consultative” role overseeing the companies.

The measure includes $15 billion in tax cuts, including expansion of the low-income housing tax credit and a credit of up to $7,500 for first-time home buyers. It covers houses bought between April 9, 2008, and July 1, 2009.