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WASHINGTON — Congress left town for the July Fourth recess with a half-baked cake in its legislative oven — one that has huge potential significance for the housing and mortgage markets.

The unfinished work is a major relief bill designed to rescue hundreds of thousands of homeowners heading for foreclosure, pull new buyers back into the real estate arena and raise loan limits in costly markets.

The Senate is on the verge of final passage of its bill, and it could do so as early as next week. The House already has passed its version. Final legislation could go to the White House later this month.

Though President Bush has threatened a veto, Capitol Hill analysts say that strong bipartisan support — plus elections in the fall — makes it highly unlikely he'd actually do so.

If you dig into this 631-page behemoth, you might find something that directly benefits you. That's especially the case if you are:

● Thinking about buying a first home. The legislation offers federal tax credits up to $8,000 per couple — and $4,000 per single — for qualified buyers of newly constructed or resale houses.

● Saddled with a debt-laden home heading for foreclosure. The pending legislation may offer you a way out — provided your lender agrees. Even if you're behind on payments and your mortgage balance exceeds your property's value, you could end up with a new, affordable Federal Housing Administration fixed-rate loan.

● Searching for a home in a high-cost market. The new housing bill is certain to provide higher limits than the $417,000 cutoff for Fannie Mae and Freddie Mac that prevailed before the economic stimulus package's temporary increase of up to $729,500, set to expire at the end of this year.

The odds are that the new maximum will be below $700,000 — the Senate bill calls for $625,000 for Fannie, Freddie and the FHA. House negotiators reportedly have been pushing for $688,000.

The new credit program would dangle tax savings in front of almost anyone considering buying a first house, or buying a house after not owning one for at least three years.

But you have to pay the credit back to the Internal Revenue Service over an extended period — up to 15 years after the tax year of the home purchase. And if you sell the house or convert it to a use other than principal residence, such as a second home or investment property, you have to repay the credit.

There's also an income restriction of $75,000 for singles and $150,000 for married joint filers. Beyond those limits, the maximum allowable credit would phase down in increments.

The portion of the legislation that deals with financially distressed homeowners would help an estimated 400,000 borrowers. It's restricted, however, to owners who can't afford their current loans and have a mortgage-debt-to-income ratio above 31 percent. The owner of the mortgage — either a lender or a bond investor — must agree to reduce the balance of the principal amount to 85 percent of the current market value, writing off a big chunk of what's owed.

If these and other conditions are met, borrowers may qualify for a new fixed-rate, 30-year FHA loan they can more easily afford.