The pen might be mightier than the sword, especially if real estate exchange traded funds (ETFs) have something to say about it.

President Bush signed a major housing bill that is meant to provide mortgage relief for 400,000 homeowners. The move could help stabilize the financial markets and improve consumer confidence, reports Jennifer Loven for the Associated Press.

The measure allows homeowners who can’t afford their payments to refinance into more affordable, government-backed loans. It also delivers a temporary lifeline to Fannie Mae and Freddie Mac, giving the Treasury unlimited power through 2009 to loan them money or buy their stock. It also tightens the reins on the two businesses.

Also included is $15 billion in tax cuts, and a $7,500 credit for first-time homebuyers for homes bought between April 9, 2008 and July 1, 2009.

Real estate and homebuilder ETFs are trading lower today:

• Vanguard REIT Index (VNQ), up 1.7% year-to-date
• iShares Cohen & Steers Realty Majors (ICF), up 1.5% year-to-date
• iShares FTSE NAREIT Residential (REZ), up 15.4% year-to-date
• SPDR S&P Homebuilders (XHB), down 8.9% year-to-date

Meanwhile, provisions for a bailout and getting the oxygen of the economy flowing again have financial ETFs trading about even, including:

• iShares Dow Jones US Financial Services (IYG), down 30.7% year-to-date
• Financial Select Sector SPDR (XLF), down 29.8% year-to-date

Tags: Financial, Homebuilders, ICR, IYG, Real Estate, REITs, REZ, Sector ETFs, VNQ, XHB, XLF