Mumbai: The US House of Representatives has approved a bill to create a $300 billion mortgage-insurance fund and throw a rescue line to at least half a million families in danger of losing their homes.

The bill, that seeks to broadly expand the availability of mortgages insured by the federal government, hopes to stabilise the housing market shaken by a wave of foreclosures and a credit crunch.

The House voted the bill 266 to 154, despite a veto threat by President Bush. Not a single Democrat voted against the measure, and the Republican votes in favor came mostly from representatives of states at greatest risk of foreclosures.

The mortgage insurance fund proposed in the new bill would give some first-time home buyers a $7,500 tax credit and send $15 billion to communities hit hard by the mortgage crisis to help them buy and fix abandoned homes.

The home-buyer tax credit measure was approved by a margin of 322 to 94.

The mortgage-insurance fund would give the Federal Housing Administration fresh cash and a new mandate to refinance borrowers whose homes have dropped in value since they took out their mortgage.

Under the programme, lenders would get an FHA guarantee on the loan if they wrote down the principal amount, an initiative that could help nearly 500,000 borrowers.

While the bill aims to mop up $300 billion for the FHA, the non-partisan Congressional Budget Office said the plan would affect no more than $85 billion in loans, in part because many mortgage investors would turn their backs on a programme that requires them to record big losses.

The bill now goes to the US Senate, which will fully debate and vote on key elements in the bill.

The Senate Banking Committee is scheduled to begin drafting similar bill to expand the FHA programme.

It is also due to take up a separate provision in the House bill that would create a new regulator for housing finance companies Fannie Mae and Freddie Mac.