President George W Bush has outlined plans to freeze rates on sub-prime mortgages for five years to help people hit by the US housing market crisis.
The move aims to shield homeowners most vulnerable to the impact of rising mortgage payments which it is feared could lead to a fresh wave of defaults.
This and other measures could help more than a million people, Mr Bush said.
He described the housing downturn as a "serious challenge" but insisted that the economy remained "resilient".
US stock markets rallied on the news of the White House plan, the benchmark Dow Jones index closing up more than 1%.
The crisis in the sub-prime mortgage sector - where loans were offered to people on low incomes and with poor credit histories - has put the brakes on the entire housing market.
Thousands of sub-prime mortgage holders have already defaulted on their payments because of the burden of higher interest rates and have lost their homes as a result.
With an estimated 1.8 million homeowners who took out loans with discount "teaser" rates facing higher payments next year, it is feared that many others could suffer a similar fate.
Announcing a package of measures, Mr Bush said the threat of foreclosure was a "terrible burden for hard-working families and communities across the country".
Homeowners seeking assistance have three options.
They can either have their payments frozen at an introductory rate for five years, refinance their mortgage at a lower rate or refinance through the Federal Housing Administration.
The government estimates that 1.2 million homeowners facing "preventable foreclosures" would qualify for such help, although they will have to request assistance themselves.
He said efforts to make it easier for homeowners to refinance their mortgages, announced in August, were beginning to work and announced a new telephone advice hotline for people worried about their mortgage situation.
He also urged Congress to provide more money for mortgage counselling and to take decisive action to reform the tax code and the regulation of mortgage financiers.
KEY POINTS OF BUSH PLAN
Vulnerable homeowners can either freeze interest payments or refinance mortgages at a lower rate
New national hotline for mortgage advice
Borrowers with good credit histories given extra flexibility to refinance
Congress urged to increase funding for mortgage counselling
Federal Reserve to announce reforms to mortgage regulations soon
Mr Bush said his plans did not signal a "bail-out" for mortgage lenders, property speculators or those "who made reckless decisions to buy a home they knew they couldn't afford".
"There is no perfect solution," Mr Bush said of the malaise in the housing market.
"But the steps I have outlined today are a sensible response to a serious challenge."
The administration's plans drew a mixed response from Wall Street, with analysts saying the success of the measures would depend on how they were applied.
"Something other than lower interest rates is needed to fix the sub-prime crisis and a freeze on mortgage interest payments is a big step in the right direction, if it works," said Cary Leahey, managing director of Decision Economics.
But leading Democrats criticised the plan as belated and insubstantial, Senator Christopher Dodd describing it as "little more than financial wallpaper".
'Weathering the storm'
Falling house prices have severely dented consumer confidence in the US, leading the Federal Reserve to cut interest rates twice in recent months to underpin the economy.
Mr Bush said the underlying prospects for the US economy were positive.
"The economy is strong, flexible and dynamic enough to weather this storm," he argued.
The US property downturn sparked the crisis in global financial markets which has seen top banks in the US, Europe and Asia lose billions of dollars on mortgage-related investments.
Several countries, including the UK and Canada, have cut interest rates in recent days in an effort to boost faltering consumer confidence.