More than three dozen House Republicans –many facing tough re-election fights --  bucked their leadership and President Bush Thursday by backing a housing rescue package.

The measure, dismissed by GOP critics as a bailout for lenders and reckless borrowers, easily passed the House in a 266-154 vote. Thirty-nine Republicans voted for the measure, including 16 listed as facing competitive races according to the Cook Political Report. However, the majority falls short of the number needed to overcome a presidential veto.

“I think this good legislation. It’s a serious work product,” said Rep. Lincoln Diaz-Balart (R), whose home state of Florida ranks near the top in foreclosures. Diaz-Balart has drawn a serious Democratic challenger this fall, although Cook does not list it as competitive.

Other Republicans voting for the bill include Rep. Robin Hayes (N.C.) and Christopher Shays (Conn.), who have narrowly won re-election in recent years. The only member of House GOP leadership who voted for the bill was Rep. Thaddeus McCotter (Mich.).

The Housing bill’s centerpiece is a measure to allow the Federal Housing Administration (FHA) to insure up to $300 billion in at-risk mortgages—but only after lenders have shrunk them to make them more affordable for borrowers.

The plan’s main author, House Financial Services Chairman Barney Frank (D-Mass.), argues that it will help stem the tide of foreclosures. He got a boost earlier this week when Federal Reserve Chairman Ben Bernanke gave the plan his tacit backing and warned that foreclosures—which hit 1.5 million last year—would continue to climb in 2008.

Many Republicans, however, argue that expanding the FHA to cover a pool of borrowers that normally wouldn’t qualify for government-backed mortgages would expose taxpayers to steep losses. They worry, in particular, that lenders will dump only their worst loans on the government.

Dozens of Republicans supported the bill despite opposition from their leaders, Bush’s veto threat and GOP anger over Democratic moves to prevent the minority party from shaping the legislation. Republicans were not allowed to offer any amendments, substitutes or motions to recommit on the floor.

Rep. Phil English (R-Pa.) described the Democratic actions as “a procedural obscenity” on Wednesday, but ultimately supported the legislation after wavering until the last minute. English is also a Democratic target this fall.

To tempt the administration, Frank bundled the measure with two pieces of legislation it sees as crucial to aiding the mortgage market—a measure to overhaul the FHA and one to tighten the oversight of mortgage giants Fannie Mae and Freddie Mac, known as government-sponsored entities (GSEs).

The package also includes several housing-related tax items, including an increase in the cap on mortgage revenue bonds issued by states and towns supported by the administration and a $7,500 tax credit for first-time home buyers.

The tax items, which also drew a veto threat, passed as an amendment by a 322-94 vote, with one more Republican supporting the measure than opposing it.

Separately, the House also approved on Thursday a bill to provide $15 billion in loans and grants to states to buy up foreclosed properties. That bill was approved in a 239-188 vote.

In a policy statement it issued on Tuesday, the White House said the inclusion of FHA modernization and GSE reform was “largely symbolic” because the House had already approved them. It called Frank’s rescue plan “overly burdensome and prescriptive.”

Frank expressed deep disappointment with the administration’s stance. “It may be that they decided that governing is over and we’re not going to let those Democrats who run this have anything,” he said.

The Congressional Budget Office (CBO) estimated the program’s price tag at $2.7 billion over five years, of which $1.7 billion would need to be appropriated for a credit subsidy to cover any defaults on the mortgages.

The legislation differs substantially from a bill the Senate passed to stabilize the housing market earlier this year. That package did not include an expansion of the FHA or GSE reform. It contained a tax break for loss-making companies and for buyers of foreclosed properties.