RPT-WRAPUP 5-US House passes housing bill;Bush lifts veto threat

(repeating story first filed on July 23)

*House passes housing bill; Senate vote still to come

*Bush drops veto threat, will sign housing bill

*Bill would offer gov't safety net for mortgage markets (Updates with House approval, DeMint letter, Reid comment on procedure, closing stock prices)

By Kevin Drawbaugh and Tabassum Zakaria

WASHINGTON, July 23 (Reuters) - The U.S. House of Representatives passed a massive housing rescue bill on Wednesday after the White House dropped a threatened veto, paving the way for passage of measures aimed at shoring up the worst U.S. home market since the Great Depression.

Withdrawal of the veto threat spurred investors to snap up shares and bonds of mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N), which would receive an emergency government lifeline under the election-year bill.

Approved on a 272-152 vote, the bill now moves to the Senate, where approval was expected within days, with the precise timing of a final vote still uncertain.

The bill had been in the works for months, but took on greater urgency as concerns about Fannie and Freddie's finances began to rattle global financial markets earlier this month.

Ten days ago, the U.S. Treasury pledged an unspecified credit line for the companies and said it would buy their stock, if needed, to bolster investor confidence. Those emergency measures required congressional approval.

The two companies, which own or guarantee almost half of the $12 trillion in U.S. mortgage debt outstanding, have recorded heavy losses in the past year amid rising defaults.

If they were unable to keep financing mortgages, analysts say the already weak housing market could grind to a halt, tipping the U.S. economy into a deep recession.

NO TIME TO WAIT

A White House spokeswoman earlier said President George W. Bush would sign the bill because it is needed urgently to address the housing and credit crisis, despite concerns about a provision that would provide grants to communities to buy and repair foreclosed homes.

"We do not believe we have time for a prolonged veto fight," spokeswoman Dana Perino said.

Lawmakers have moved with unusual speed since the Treasury proposed the financial backstop for the two companies.