WASHINGTON (AFP) - A wide-ranging housing rescue plan passed by the US House of Representatives on Wednesday could help ease the downward spiral in the property market that is weighing on the US economy, analysts say.

The plan, which offers aid to homeowners facing foreclosure and seeks to support mortgage finance giants Fannie Mae and Freddie Mac, cleared a major hurdle before the House vote Wednesday when the White House dropped its threat to veto the plan, despite some reservations.

"This is a positive step," said Gary Thayer, senior economist at Wachovia Securities.

"If the housing market continues to decline it will hurt homeowners and lenders. I think it's important to stabilize the situation because the Fed (Federal Reserve) can't do much more in cutting rates."

The legislation, which passed in the House by 272 votes to 152 and will now be submitted to the Senate for approval before going to President George W. Bush for his signature, provides some 3.9 billion dollars to help local governments buy and rehabilitate foreclosed homes.

It also permanently boosts the dollar limit for mortgages that can be repurchased by Fannie and Freddie and expands the federal mortgage insurance program, moves that could add liquidity to the housing market. The bill would allow the Federal Housing Administration to insure an additional 300 billion dollars in loans.

Significantly, the bill reforms Fannie and Freddie's oversight and would provide for new credit and direct federal investment in the government-sponsored enterprises (GSEs), which have a congressional charter but are owned by shareholders.

White House spokeswoman Dana Perino said Bush agreed to the plan to help deal with the crisis, despite a number of objections.

"The president would not have signed this bill if we had a lot of extra time on our hands. We don't," she said.

"Congress is set to go out to recess -- on its next recess, and we do not believe that given the essential need to move promptly right now that a prolonged veto fight -- even though we think we would win it -- that a prolonged veto fight would be good for the housing industry right now."

Perino said the administration was concerned that the aid package "does nothing to help people actually stay in their home, and in fact there are some people who believe it would actually cause more foreclosures."

She said banks now have an incentive to keep homeowners in place but that "if they know they're going to get a bailout from the federal government or from their state government because we're providing them money, they're less likely to try to help people stay in their homes."

Brian Bethune, economist at Global Insight, said Congress and the White House were forced to compromise amid fears of a meltdown in Fannie and Freddie, which could have further roiled a troubled financial system.

"This bill is long overdue -- but it took a crisis to break the logjam," Bethune said.

"Stabilizing the GSEs at this point is a 'must do.' The recent support from the Fed and the Treasury, combined with increased financial authority under this bill for the Treasury to backstop their capital, should catalyze renewed private investor interest."

A congressional estimate indicated the government might shell out 25 billion dollars in aiding the GSEs, although there is a possibility it may cost between zero and 100 billion dollars.

Overall, Bethune said the measure appears to support a fragile economic recovery that has been held back by housing and credit concerns.

"The right constellation of monetary and fiscal policies should promote a stabilization of the housing market and get the economy rolling again -- in this case the Treasury could be on the hook for much less than 25 billion dollars," he said.

"Any major missteps, however, would mushroom the cost to the Treasury, and the American taxpayer, to 100 billion."

The House of Representatives' Republican whip Roy Blunt objected to what he said would be "a 300-billion-dollar bailout of mortgage lenders, allowing them to offload their worst loans onto the Federal Housing Administration."

"I believe rewarding, encouraging and reinforcing risky investments should not be the role of the government -- and certainly shouldn't be financed by taxpayers," Blunt said.

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