WASHINGTON - The Senate moved against the worsening mortgage crisis yesterday, voting to make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans.

The legislation, approved 93-1, would allow the Federal Housing Administration to back refinanced loans for borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial "teaser" levels.

The bill also tries to make FHA loans more attractive than risky subprime loans by accepting lower down payments and expanding the eligibility for counseling for homeowners having difficulty with their mortgage payments.

An estimated 2 million to 2.5 million adjustable-rate mortgages are scheduled to reset in the next year, jumping to much steeper rates that could cost borrowers their homes. The wave could crest during the presidential and congressional election campaigns next year.

The Senate's proposed changes are especially important now, given the credit crisis that has made it much more difficult and more expensive to refinance or get financing to buy a home. Private lenders have been reluctant to make new loans.

Allowing the federal government to insure more and bigger loans should help provide some relief and ease the credit crunch.

The Senate's plan would give homeowners "the option of refinancing to an FHA-backed loan with the peace of mind that comes with it," Senate Majority Leader Harry Reid (D., Nev.) said. "And for future homebuyers, a fully backed FHA loan with honest, upfront terms will help prevent crises like we now face."

Modernizing the FHA is Congress' first attempt at stand-alone legislation to ease the subprime-mortgage mess. The House passed a bill similar to the Senate's in September.

The White House announced last week that it had negotiated an agreement with mortgage companies to freeze interest rates for certain subprime mortgages for five years.

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

The House measure would raise the maximum mortgage to $729,750 in high-cost areas.

The Senate bill would also lower the FHA down-payment requirement from 3 percent to 1.5 percent, depending on several factors, and make it easier for FHA loans to be used to buy condos.

The only senator to vote against the bill was Jon Kyl (R., Ariz.). "With the mortgage market already in turmoil as a result of too many mortgages being made available to those who cannot afford them, now is not the time to relax standards even further and make taxpayers liable if borrowers default," Kyl spokesman Ryan Patmintra said.