WASHINGTON -- Housing and mortgage lobbyists are biting their nails these days -- and for good reason. Some long-standing government support of housing could come under attack as Washington undergoes a historic power shift.

Observers say that Congress may seriously consider cutting the tax deduction for mortgage interest and imposing volume-based taxes on the quasi-governmental Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.

Already, the Office of Management and Budget has proposed a drastic reshaping of the Federal Housing Administration, which insures many loans written by mortgage bankers.

Such proposals have surfaced before only to be quickly buried. But lobbyists aren't taking chances this time. The new, Republican-led Congress may well prove receptive to the ideas as it moves to reduce the budget deficit, observers say.

"Our antennae are up," said Warren Lasko, executive vice president of the Mortgage Bankers Association. "I do think we have a new political environment. Nothing is off the table."

Housing and mortgage lobbyists say they expect to prevail by arguing that such changes will be politically unpopular, because they would make it more difficult for middle-class Americans to own homes. But "the logic of the past is not necessarily going to hold for the future," warned Rick Hohlt, a lobbyist for banks and thrifts.

"The No. 1 battle that is going to set the tone is the budget battle," said Mr. Hohlt. "You can't have everything."

Earlier this year, a budget drawn up by the incoming chairman of the House Budget Committee, Rep. John Kasich, R-Ohio, proposed taxes on Fannie and Freddie based on the amount of securities they issue. While the measure was not adopted, analysts and lobbyists say that such user fees could resurface now. "If the priority is balancing the budget, Fannie and Freddie are targets," said Mr. Lasko of the mortgage bankers.

Stock analysts say that proposed fees could amount to one-tenth of 1%, or $100 on every $100,000 of loans that flow through the agencies.

Under the unsuccessful Kasich plan, the fees on the two secondary market agencies, as well as two other government-backed agencies (Sallie Mae and Connie Lee) would have yielded $2.6 billion in revenue over five years.

The argument is that there are now private companies that can perform the same role as the agencies: supporting a secondary market for home loans. The fees, to be levied on the agencies' debt and mortgage-backed securities, would "level the playing field."

Stock analysts have argued in recent weeks that the agencies would pass on most or all of the increase to homeowners by raising mortgage rates. That, they say, would make the user fees politically unpalatable, and thus unlikely.

But others say Fannie Mae and Freddie Mac may be forced to absorb some of the increase themselves. "It's not inturitively obvious" that the agencies would have to pass on the increase to homeowners, said Patrick Lawler, a former Senate staffer, now at the Office of Housing Enterprise Oversight. "It would probably depend on the size of such a fee.'

Fannie Mae's senior vice president for communications, John Buckley, dismissed talk of user fees as "speculation."

He said it was unlikely that user fees would even surface as a legislative proposal, now that Republicans are in the majority and writing a working budget.

"If it were to become an actual proposal, we would respond very vigorously in opposition," he added. Meanwhile, mortgage bankers, home builders, and realty companies are battening down the hatches on another staple of budget debate -- the mortgage interest deduction.

As one of the largest deductions, "the sheer number draws attention to itself," said Jerry Howard, legislative counsel of the National Association of Home Builders.

"I think those who would undermine it are a bipartisan crowd," said Michael Hussey, senior legislative director of the National Association of Realtors.

Then there's the Federal Housing Administration reform proposed by the Office of Management and Budget.

The proposal would change the FHA from an agency that insures 100% of individual loans to one that would provide a limited credit enhancement to large pools of high loan-to-value and other highrisk loans underwritten and securitized by others, probably Fannie and Freddie.

The losers, says the mortgage bankers association, would be homeowners. "Our sense is the OMB proposal would reduce competition and increase the cost of housing," said Mr. Lasko.

The winners would likely be Fannie, Freddie, and mortgage insurers, who would also provide insurance on the loans.

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