The Bush administration is finalizing details of a plan to rescue thousands of homeowners at risk of foreclosure by helping them refinance into more affordable mortgages backed by public funds, government officials said.

The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth because of plummeting prices, an issue at the heart of the nation's housing crisis. Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government.

The plan is similar to elements in legislation proposed two weeks ago by Barney Frank (D-Mass.), who chairs the House Financial Services Committee, officials said. . . . If enacted, the plan would mark the first time the White House has committed federal dollars to help the most hard-pressed borrowers, people struggling to repay loans that are huge relative to their incomes and the diminished value of their homes.