Fannie Mae is preparing to introduce by midyear a program of refinancing mortgages for people who owe more than the current value of their homes, a situation known as being "underwater."

The plan is the latest twist in efforts to contain the surge in foreclosures on homes in much of the U.S. It differs from a bill approved by the U.S. House of Representatives Thursday that would authorize the Federal Housing Administration to insure loans for distressed borrowers only after the lender has written down the principal -- something many lenders are reluctant to do. Fannie's refinance plan would result in new loans of equivalent size, leaving the borrower underwater but giving him or her a lower monthly payment or at least a fixed rate.

Officials of Fannie, a government-sponsored provider of funding for home loans, said the new program is limited to people who have kept up on their payments so far and whose loans are owned or guaranteed by the company. Normally, it's impossible for underwater borrowers to qualify for refinancing because the collateral isn't worth enough to support new loans that would let them fully pay off the old ones. But Fannie officials say in some cases it can make sense to refinance such people if the new loan will reduce their interest rate or let them lock into a fixed rate rather than risking future upward adjustments.

"We're saying to the consumer, 'You're not trapped any more,'" said Jeff Hayward, a senior vice president at Fannie.

The program will allow refinance loans of as much as 120% of the current property value. Fannie officials project that 150,000 households could qualify for such refinancings. Zillow.com, a real-estate data provider, estimates that half of the people who bought homes in 2006, around the peak of the housing bubble, now owe more than the value of the homes.

Rather than reducing the principal due on the loan and taking an immediate loss, Fannie is betting that these people will be able to keep up on their new loans and prices eventually will recover.

The National Association of Home Builders and the National Association of Realtors praised the program, and many politicians have been pushing Fannie and its rival, Freddie Mac, to do more to help distressed borrowers. "They're obviously getting some political goodwill," said Gary Gordon, an analyst at Portales Partners in New York.

But some critics warn Fannie may be only delaying the inevitable in many cases. "They are pushing losses out into the future," said Joshua Rosner, an analyst at Graham Fisher & Co. in New York. Mr. Rosner said the danger is that house prices will keep falling and borrowers will have too little incentive to keep making payments when they have no equity in the homes.

Fannie has argued it can reduce the number of foreclosures without incurring excessive new risks.

In another foreclosure-prevention program, announced in February, Fannie finances unsecured loans of as much as $15,000 to people who have fallen behind on their mortgages, allowing them to pay the past-due amounts. These 15-year, 5% loans are aimed at people who fell behind on their payments because of a temporary financial squeeze but can afford to meet future monthly payments, Fannie officials say.

The companies want to avoid immediate loan losses that would further erode their meager capital cushions. Fannie, for instance, has about $43 billion of capital, as defined by its regulator, equal to 1.4% of the $3 trillion of mortgage loans it owns or guarantees. Fannie is raising more than $6 billion of capital through offerings of common and preferred shares, but Mr. Rosner and some other analysts doubt that will be enough given the growing costs of mortgage defaults.

Write to James R. Hagerty at bob.hagerty@wsj.com

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