A mortgage disclosure reform proposal issued to Congress last week revealed deep divisions between the two federal agencies that authored it.

The Federal Reserve Board and the Department of Housing and Urban Development made many joint recommendations in their report, but the Fed declined to sign on to some of HUD's more consumer-friendly propositions.

HUD said lawmakers should, among other things:

*Impose new data collection and reporting requirements for loans covered by the Home Ownership Equity Protection Act.

*Consider giving customers the right to sue lenders who take unfair advantage of them.

*Prohibit "flipping" and other abusive lending practices.

*Impose additional restrictions on prepayment penalties lenders charge.

*Require lenders to take into account the consumer's ability to repay before approving a loan.

*Allow delinquent borrowers to sell their homes before any foreclosure action.

"HUD tends to have more of a consumer advocacy posture," said Wright H. Andrews Jr., a lawyer who lobbies for the National Home Equity Loan Association.

By contrast, Neill E. Fendly, vice president of the National Association of Mortgage Brokers, said the Fed is taking a balanced approach that would benefit consumers without harming the industry.

"The Fed wants to make sure that the flow of credit, the availability and the ordinary flow of business, is not impeded," he said.

HUD and the Fed unveiled their report on July 17 at a hearing held by two Senate Banking subcommittees. They will present it to a joint hearing of two House Banking subcommittees on Wednesday.

The debate over where to draw the line between consumer and industry interests played out Monday at a meeting of the Mortgage Reform Working Group, a diverse assembly of industry and consumer groups that gathered for the first time since early May.

Clashes between lenders and consumer groups remain the group's primary fault line, said sources at the six-hour meeting.

Mortgage industry officials tore into HUD's proposal to impose a "fairness" standard on lenders, sources said. Mr. Andrews said it would cause "heartburn" and open the door to many lawsuits by disgruntled consumers.

Industry representatives also criticized a joint HUD-Fed proposal to give lenders two options for estimating closing costs, sources said.

Mr. Fendly said it was "possible" but "highly speculative" that the working group would be able to create a consensus proposal of its own by the time Congress holds more hearings in September.

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