The legislation, approved 93-1, is the Senate's first attempt to address the looming subprime mortgage crisis through stand-alone legislation. Sen. Jon Kyl, R-Ariz., was the lone senator to vote no.

The bill would allow the Federal Housing Administration to back refinanced loans for tens of thousands of borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial "teaser" levels.

An estimated 2 million to 2.5 million adjustable-rate mortgages are scheduled to "reset" this year and next, jumping from low "teaser" rates for the first two or three years to much steeper rates that could cost borrowers their homes.

The wave of resets could crest during the presidential and congressional election campaigns next year, and the issue has brought politically charged debate in recent weeks over possible responses by the government.

The legislation will help the Federal Housing Administration "be a source of salvation for those families who were tricked into unaffordable loans," said Sen. Charles Schumer, D-N.Y.

President Bush last week announced an agreement with mortgage companies to freeze interest rates for certain subprime mortgages for five years. Democrats in Congress, however, criticized the White House plans as being too limited.

The Senate bill raises the maximum mortgage the FHA can insure in high-cost areas from $362,790 to $417,000 — the same level as loans backed by Fannie Mae and Freddie Mac.

The FHA currently insures 3.7 million mortgages, but critics say the size of mortgages the government agency can back is often too small to attract borrowers in expensive areas such as California and the Northeast. As a result, FHA's share of the single-family mortgage market has dropped to about 4 percent, down from 19 percent more than 10 years ago.