The near-collapse of a major investment firm over the two-week recess and voters’ concerns about the economy jolted Senate Democrats and Republicans into a compromise on housing legislation.

Both sides announced Tuesday a cessation of partisan warfare on the housing issue, but left vague details such as amendments that tied up the issue earlier in the year.

“I think everyone was home for a couple of weeks and if they heard what I heard in Florida, I think they realize that this is a serious, serious problem,” said Sen. Mel Martinez (R), whose state has been one of the hardest hit by housing foreclosures. “It has moved beyond the dimension of being the problem of a homeowner who wants to stay in a home and may be in danger of losing it … to the fact that it’s impacting the economy in a very dramatic way.”

Senate Majority Whip Dick Durbin (D-Ill.) agreed that the recess served as a wake-up call in both parties, though perhaps more so for Republicans who had initially blocked the Senate from considering a Democratic-backed bill designed to ease the foreclosure crisis.

“It had to have had an impact,” Durbin said. “I think some of my friends here in the Senate decided they didn’t want to miss the parade.”

But Martinez said the movement was on both sides of the aisle. “I think we both blinked. I think it’s a mutual recognition of the importance of the issue,” he said.

Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) applauded their compromise at a joint press conference Tuesday. Yet the deal remains tentative; the two leaders simply agreed to allow Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) to hash out a compromise that would be brought to the floor today.

“We’ve concluded on a bipartisan basis here that we’re not just going to have a check-the-box exercise,” McConnell said. “We’re going to legislate. We’re going to do it on a bipartisan basis.”

The turn of events on Tuesday had its genesis in the shock Senators — especially Republicans who were initially reluctant to embrace the housing bill — felt at the Federal Reserve bailout of Bear Stearns, an investment firm whose failure was caused in part by the collapse of the subprime mortgage market.

“I think that two weeks ago when the Federal Reserve chairman made the extraordinary move on Wall Street into extending credit to an investment bank not covered by [Federal Deposit Insurance Corporation] insurance … that he helped reframe the issue and changed the dynamics,” Shelby said.

Martinez echoed that sentiment: “I think the fact that a major bank like Bear [Stearns] could be succumbed ought to be a wake-up call to anyone about the seriousness of economic crisis and the financial crisis.”

At the end of February, Reid attempted to bring up a bill that Republicans opposed primarily because of a Durbin-backed provision that would have allowed bankruptcy judges to renegotiate loan terms on primary residences. Republicans also objected to provisions to provide $4 billion in Community Development Block Grants for localities to buy and rehabilitate distressed and foreclosed properties.

Reid demanded that Republicans agree to offer only germane amendments, which would have prevented them from offering a number of tax-related proposals. As Republicans — joined by a few Democrats — blocked the bill from coming up for debate, they also appeared to struggle to offer counterproposals and attempted in the following weeks to outline remedies they could support.

Democrats originally tried to move forward with the measure devised by their leadership, rather than one crafted by Dodd and Shelby because the two leaders of the Banking panel were at odds over giving the Federal Housing Administration increased authority to fend off foreclosures, Durbin said.

But Dodd said Monday that he and Shelby were close to an agreement, and Reid and McConnell have given them until noon today to put a compromise bill on the floor.

Martinez said the ability to move forward Tuesday stemmed in part from the Democrats’ willingness to shelve their original bill and hand the process over to Dodd and Shelby.

Recognizing the uncertainty of the process, Reid appeared to leave open the possibility that even the Dodd and Shelby measure might not receive universal support, and maybe not even from him.

“We’re hopeful and confident that it can be one that both leaders can support,” he said.