Washington - The US House of Representatives on Wednesday passed major legislation aimed at limiting the economic fallout from the US housing crisis and providing relief to struggling homeowners.

The long-awaited bill expands a programme that helps struggling homeowners refinance into government-insured mortgages - effectively guaranteeing up to 300-billion-dollars worth of loans - and approved a government contingency plan in the event of the collapse of lending giants Fannie Mae and Freddie Mac.

The bill, which passed the House by a 272-152 vote and could be approved by the Senate as early as later Wednesday, also provides 4 billion dollars to help local governments in some of the hardest-hit communities around the US to buy up foreclosed properties that have helped drive down housing prices.

President George W Bush dropped an earlier veto threat late Tuesday, paving the way for Congress to approve the legislation. But a number of Republicans still criticized the measures for overburdening taxpayers by rewarding homeowners and speculators that took out loans they could not afford.

US Treasury Secretary Henry Paulson reportedly urged the White House to drop its opposition because of the added rescue plan for Fannie Mae and Freddie Mac, which together manage nearly half of the 12-trillion-dollar US mortgage market.

Democrats, who hold majorities in the House and Senate, said the legislation was crucial to stem the wider economic fallout from the housing and financial turmoil.

"We are addressing a crisis of historic proportions," House Speaker Nancy Pelosi said. "The last thing our economy needs is for Fannie and Freddie not to be able to make loans."

Home prices across the US have fallen dramatically since early 2007, sparking a record number of foreclosures by homeowners that could no longer afford to pay off their mortgages. (dpa)