A major Washington area lender, also one of the nation's largest mortgage companies, yesterday stopped making loans to prospective homebuyers in the Washington-Baltimore area and began drastically cutting back on residential mortgages elsewhere.

As financing for housing continued to dry up, officials of Fidelity Bond & Mortgage Co. of Philadelphia announced yesterday they would shut down their residential mortgage originating business in this area entirely.

Company officials said that an estimated $35 to $50 million worth of loan commitments and applications pending in the six Washington area offices would be placed with other lenders or otherwise honored.

There were indications, however, that the cost of that money might be higher than borrowers had originally anticipated.

Vincent DiBiase, president of Fidelity Bond & Mortgage in Philadelphia, said the company plans to reduce its residential mortgage originating business to "a very small minimum" and will concentrate much of its limited business in Pennsylvania, where the company is based. Fidelity has 20 offices up and down the East Coast.

The company will continue to service more than $1 billion worth of residential and commercial mortgages nationally and will continue to originate commercial mortgages, officials said.

"it's not a permanent thing. It's just a temporary slowdown," because the residential mortgage business has become so unprofitable, said a company spokesman in Philadelphia.

Reports were mixed as to what was happening with the company's local operations. Regional Vice President Allan Bernstein said that the shut-down here would be gradual. But Assistant Vice President Joseph Rogers Jr. said the six offices in this area and Baltimore would close immediately.

Rogers also said 60 to 70 people who work in those offices will be kept on the payroll until at least today and possibly longer.

The news of Fidelity's decision to get out of the business of making loans for homebuyers came at a time when mortgage compaines in general are experiencing difficulties because of the high cost of credit. Three other Washington area mortgage companies in the past week laid off employees and cut back on their loan originating business.

The Wall Street Journal reported on Tuesday that Standard & Poor's had downgraded Fidelity's mortgage backed notes because of what Standard & Poor's called "sudden and unexpected" trading losses.

The Wall Street Journal also quoted as saying that some dealers may face losses and that their problems stem from a chance that Fidelity "won't or can't take delivery on commitments with them totalling more than $300 million."