On Wednesday, President Bush — sensing strong political headwinds — wisely signed into law a housing rescue bill he'd strongly opposed not all that long ago. The U.S. Senate even convened a rare weekend session to approve the measure.

The urgency and willingness to take extraordinary steps made sense, given that homeownership has long been central to the American dream.The final housing rescue bill isn't perfect, but doing something right now is a lot better than fiddling while the housing market burns further.

The bill's most significant provision will allow the Federal Housing Administration to greatly expand its decades-old role of insuring fixed-rate mortgages made by private lenders. The law gives the FHA authority to back up to $300 billion in home loans made to an estimated 400,000 struggling homeowners.In a market where a million homes are in foreclosure, the measure will aid property owners and help restore a measure of confidence in the shaky housing market.

Taxpayers, thankfully, shouldn't end up on the hook for the program. Any losses incurred will come from an affordable-housing trust fund fueled by mortgage powerhouses Fannie Mae and Freddie Mac.

The new plan calls for prudent safeguards against both lenders looking to dump bad loans and clueless deadbeats intent on wheedling a handout. Those protections make the risk worth taking, given the current skittishness among private lenders.

For one, FHA-approved lenders looking to use the program have to take a loss by writing down loan balances to reflect today's prices. Congress is right to believe that lenders should prefer discounting loans to foreclosing on houses in a down market.

Homeowners will also offer up a sacrifice to take part in the plan. For one, approved borrowers will have to share future gains with the FHA. Loans will also be based on buyers' ability to handle the long-term note. Given the chicanery we've seen from private lenders in the subprime mess, a return to more conservative lending standards is certainly appropriate.

The bill also proffers $3.9 billion in grants to communities affected the most by the housing meltdown. The money will pay for buying and rehabbing foreclosed properties. The Bush administration opposed this part of the plan, believing it would offer an unwarranted escape path to bad lenders. That's a legitimate concern, but local agencies and governments should know their turf well enough to both guard against undesirable sellers and spend the money where it will do the most good.

The new law also calls for modernizing the FHA. The agency's maximum loan amount will rise, and a controversial plan wherein home sellers helped buyers with downpayments will be shut down. That's a prudent move, given the large number of buyers who were unwisely steered into ownership they weren't ready for.

Another implement in the housing tool kit is a tax credit for first-time home buyers. The final version of the idea championed by Sen. Johnny Isakson (R-Ga.) ended up being a "refundable" credit of up to $7,500. Refundable means it's actually a loan, to be paid back to Uncle Sam over 15 years.

Isakson's initial, straightforward tax credit would have been simpler and better, given that many people don't understand mortgage fine print. Narrowly drawn tax policy is not usually a good thing, but given the depth of this crisis, Isakson made a logical point this week that even a "refundable" credit will "be a stimulus to the market."

Viewed as a whole, the housing rescue plan admirably reaches toward the greater good of aiding homeowners and helping stabilize the housing market. Isakson correctly noted that "there's nothing that will depress values in a neighborhood faster than a vacant, foreclosed house."

The government's now taken a big step toward trying to calm housing's jitters. Now credit markets should settle down and step up.

— Andre Jackson, for the editorial board