WASHINGTON (Reuters) - The Senate was expected to approve as soon as Wednesday the biggest government program yet to tackle a deep housing market slump feared to be dragging the economy into recession.

A foreclosed home is seen in Stockton, California in this May 13, 2008 file photo. REUTERS/Robert Galbraith/Files

The legislation would create a $300 billion fund to help up to 400,000 troubled homeowners refinance costly, exotic mortgages into more affordable, government-backed loans. It easily cleared a Senate test vote by an 83-9 vote on Tuesday.

The bill is opposed by the White House but supported by Democrats and many Republicans. It would also overhaul regulation of Fannie Mae and Freddie Mac, the government-sponsored enterprises that are the largest U.S. mortgage financing companies.

If the Senate approves it, the bill would have to be reconciled with a similar measure already passed by the House of Representatives. Lawmakers hope to send a final package to President George W. Bush by mid-July.

The two main Democratic authors of the legislation, Massachusetts Rep. Barney Frank and Connecticut Sen. Christopher Dodd, met face-to-face on Tuesday.

The White House signaled on Tuesday that it could support the bill if lawmakers trimmed certain spending provisions.

“The most significant concern that we have with the bill is that it would provide for $4 billion to states to purchase already foreclosed homes,” Bush administration spokeswoman Dana Perino told reporters. “And our concern is that that just helps the banks, that doesn’t the consumers.”

Treasury Secretary Henry Paulson said some part of the Senate bill are objectionable and the Bush administration wants them changed. He declined to say whether the White House would veto the bill.

Alabama Sen. Richard Shelby, the main Republican architect of the housing package, said he expects that some spending will be dropped before the bill is presented to Bush.

“I think at the end of the day, we will knock that out,” Shelby said of the state grants, in remarks to reporters.

The proposed refinancing fund would be bankrolled by a tariff on Fannie Mae and Freddie Mac. Other provisions of the bill would send $4 billion in aid to communities hard hit by foreclosures, reform mortgage disclosure and give $180 million to loan counseling centers.

As Congress debated, more industry data underscored the severity of the housing slump. Home prices slid 15.3 percent in April compared to a year earlier, according to a survey of top metropolitan regions from S&P/Case Shiller.

The glut of vacant homes on the market, caused by falling prices and rising foreclosures, has made the stocks of some homebuilders look cheap, said investment bank Credit Suisse.

Credit Suisse forecast that home inventories would peak in spring 2009.

“This bill needs to be made law as soon as possible,” Jerry Howard, chief executive of the National Association of Home Builders, an industry group, said at the press conference.