The savings and loan industry is in better shape than it thinks, but must change with the times and use its extensive mortgage assets in different ways if it is to prosper, former U.S. budget official Maurice Mann said today.

Mann, assistant budget director under President Nixon and later president of the Federal Home Loan Bank of San Francisco, told members of the Metropolitan Washington Savings and Loan League that the challenge of the 1980s is to "use mortgages to raise liquidity [assets readily convertible into other investments] and capital."

More savings and loans will have to begin buying and selling mortgages, he asserted. "This is the way it's going to be . . . Anybody who holds a mortgage for more than 15 seconds will be sorry."

Mann, who currently is vice chairman of Warburg Paribas Becker Inc., an international investment banking firm, said many people "are now talking about using mortgages to finance their activities, one of the most exciting things for the 1980s."

Savings and loan industry representatives at the D.C. trade association's 71st annual meeting have been pessimistic about the future of their business, in contrast with Mann's optimism. In particular, they are discouraged by continued high interest rates and low profits and more recently by the recommendation by President Carter that small savers should receive the same yields on their deposits as large investors in corporate and government securities.

Officers of savings institutions, created to make home mortgages widely available, said they are afraid now that if the interest ceilings on savings deposits are lifted they will lose the one-quarter of a percentage point differential between what they and commercial banks can offer savers. The differential has assured the savings industry that it would have enough money to make mortgage loans, officers stated.

According to Mann, "a way has to be found to find an interest rate that at least matches the rate of inflation . . . This is the direction in which I think the president (Carter) is moving."

The emphasis has now shifted from the borrower to the saver, Mann added. "It has now become abundantly clear that the borrower can take care of himself. The borrower has no qualms about paying 10 percent interest or 11 percent interest because he figures it's better to pay that than see the price of the house go up one percent a month," Mann said.

"For many years the small saver has been ripped off," Mann added. "The issue is that the rate of interest is less than the rate of inflation."

Although Mann began by saying that "all this crisis talk and pessimistic talk" within the industry "is a bunch of nonsence," he said later during his address that savings and loans can expect more competition from banks, credit unions and non-regulated firms such as department stores and insurance companies. For instance, Sears, Roebuck & Co. is selling notes to its charge accounts customers, and many small municipalities and selling securitites.

"Maybe you should think about diversifying yourselves . . . with a range of consumer financial services," Mann counseled.

Mann said that deposits will continue to shrink as a percentage of funds and that in several years deposits may be only about one-third to one-half of each S&L's total source of funds.

Mann told the savings and loan members that they might as well get used to "living in an economy in the next three, four, or six years with slow growth, high inflation and high interest rates. It's going to take us a long time to dig ourselves out of the mess we've gotten into."

Addressing the suggestion by Federal Home Loan Bank Board Chairman Robert H. McKinney that Washington S&L's be allowed to branch into the Maryland and Virginia suburbs, Mann said that he "welcomes it with open arms," particularly if Maryland and Virginia firms are allowed to open offices in the District. CAPTION: Picture, MAURICE MANN . . . backs interstate S&Ls