A key Senate panel has approved a homeowner rescue plan to give cheaper, government-backed mortgages to up to 500,000 strapped borrowers.

Eight Republicans joined Democrats on the Senate Banking Committee to advance the housing rescue package. It also includes tougher regulations for government-sponsored mortgage giants Fannie Mae and Freddie Mac.

The bill would let the Federal Housing Administration back up to 300 billion dollars in new loans for struggling homeowners who would otherwise be considered too financially risky to access a fixed-rate, government-insured mortgage.

Under a key concession to Republicans, the FHA rescue would be financed by Fannie and Freddie profits, by temporarily diverting a fund to provide housing for the poor.