WASHINGTON (Reuters) - The U.S. Congress approved a massive housing market rescue bill on Saturday, offering emergency financing to mortgage titans Fannie Mae and Freddie Mac, and setting up a $300-billion fund to help hundreds of thousands of troubled homeowners.

Approved by the Senate in a 72-13 vote, the election-year rescue bill was passed by the House of Representatives on Wednesday. President George W. Bush was expected to sign it promptly, amid doubts about how much it would help.

With foreclosures at record levels, home sales sluggish and property values down, America is in its deepest housing slump since the Great Depression.

Fears that Fannie Mae and Freddie Mac, the largest U.S. mortgage companies, might collapse rattled global markets earlier this month and led the Bush administration to call for emergency measures to bolster investor confidence.

They recently lost billions of dollars on bad home loans and the stock market has whipsawed their share prices on uncertainty about whether they have enough capital.

Housing activists and scholars said this election-year bill will ease, but not end, the housing crisis.

“We have a housing market going into cardiac arrest. This bill is like CPR to stabilize the situation,” said David Abromowitz, a senior fellow at the Center for American Progress, a think tank in Washington.

The National Community Reinvestment Coalition, an alliance of 600 community investment and development groups, estimated 2.5 million U.S. households will face foreclosure this year.

While Congress’ legislation is welcome, the coalition said, it “will likely have little effect on the foreclosure crisis gripping the financial markets and economy.”

HELP FOR FANNIE, FREDDIE

As private finance has retreated from the mortgage sector, the importance of Fannie Mae and Freddie Mac has grown, and they own or guarantee almost half the country’s $12 trillion in outstanding home mortgage debt.

Under a provision put into the bill late in its development at the administration’s urging, Fannie and Freddie could draw on a temporary line of U.S. Treasury credit or the government could buy shares in them, if they ran into trouble.

Texas Republican Sen. Kay Bailey Hutchison said the housing bill had positive aspects. But she added, “I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac” and possible government stock purchases.

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The bill establishes a $300-billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under exotic mortgages they cannot afford.

The success of the temporary fund will depend on lenders’ willingness to accept losses on original loans to shift overstretched borrowers into new loans. An estimated 400,000 families could be helped by the program.

But it would not take effect until October 1 and housing activists said it might not be in full operation until 2009.

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Connecticut Democratic Sen. Christopher Dodd, who steered the bill through the Senate, said the FHA fund should need “four months to get it up and running.” He said he would meet with agency officials to urge rapid implementation.

The bill sends about $4 billion in grants to communities to help them buy and repair foreclosed homes; offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers; and raises the limit on the size of mortgages that federal agencies can guarantee.

NEW REGULATOR

The bill also creates a new regulator for the shareholder-owned companies with sharper teeth than the existing one, including power over their capital levels and over their executive compensation and internal financial controls, and with Federal Reserve consultation.

Because Fannie Mae and Freddie Mac are chartered by Congress they are often referred to as government-sponsored enterprises, which also gives them an implied government guarantee.

Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters after the vote he expects the bill to be sent to the White House on Monday.

“Because of the Democratic Congress’ delays and the need for action now, President Bush will sign this bill when he receives it, despite our concerns with some provisions, including nearly $4 billion to help lenders, not the homeowners this legislation is intended to serve,” White House spokesman Tony Fratto said.

Both presidential contenders Barack Obama and John McCain praised the Senate’s passage of the housing bill.

Illinois Democratic Sen. Obama said in a statement that the bill was “urgently needed” and represented “an important start to protecting homeowners and restoring stability to our housing market and our economy.”

Sen. McCain, an Arizona Republican, “believes that relief for struggling homeowners is overdue, applauds the passage of this legislation and urges the president to sign it quickly,” said McCain spokesman Taylor Griffin in a statement. (Reporting by Kevin Drawbaugh and Patrick Rucker, editing by Jackie Frank)