The Senate on Friday afternoon approved a major package of housing legislation, including a rescue plan aimed at helping hundreds of thousands of troubled borrowers avoid foreclosure by refinancing their mortgages.

The bill would authorize the Federal Housing Administration to insure up to $300 billion in refinanced mortgages, enabling borrowers now saddled with unaffordable loans to assume more manageable 30-year fixed-rate loans. To take part in the program, lenders would have to lower each debt obligation to 90 percent of a home’s current value and also make a payment to an insurance fund to insulate taxpayers against losses from any future defaults.

Borrowers would stay in their homes but would have to document income showing their ability to pay the new loan as well as a 1.5 percent annual insurance premium. The government would retain a stake in the property and would share in any profit if values rise and the home is sold.

(Source: Associated Press)