The budget reconciliation legislation signed yesterday by President Carter includes a provision to allow states and local government to continue issuing tax-exempt mortgage revenue bonds at least through 1984 but with new restrictions.

The limits, aimed at preventing abuses of the increasingly popular and costly indirect federal housing subsidy, would be expected to reduce the annual cost to the federal government by more than two-thirds by 1984.

The action represents a hard-fought compromise between those who wanted to help the distressed housing industry and those who wanted to keep the federal budget deficit down. The legislation calls for lifting the tax exemption on mortgage revenue bonds in 1984, which in effect would kill them, but some congressional sources have indicated the life of the this tax-exempt financing may be extended under the next Congress.

Mortgage revenue bonds are used by states and municipalities to finance residential housing at below-market interest rates. Because investors receive tax-free interest on the bonds, they can be sold at lower interest rates than taxable bonds, and the savings passed on to home buyers in the form of lower mortgage rates (often two or more percentage points off.)

Though the bonds were intended to offer low- and moderate-income households who otherwise could not qualify for a mortgage a chance to buy a home, there were many instances in which taxpayers wound up subsidizing rich buyers. The bonds have been particularly popular in states such as California where housing costs are soaring.

Alleged abuses, plus the drain on Treasury revenues, prompted the House Ways and Means leadership to introduce a bill last year to set stringent limitations on the use of tax-exempt mortgage revenue bonds. Yet the curbs ran into opposition from committee members.

The measure also was opposed by the Senate Finance Committee, whose chairman, Sen. Russell Long (D-La.), accused the House last May of "keeping people from owning homes, keeping states and counties from coming to the aid of their citizens." The Senate took no action other than to pass a resolution stating that any restrictive legislation should not apply to bonds issued in 1980.

Conferees agreed to continue the bonds' tax exemption for three more years, but they put a cap on the overall amount of bonds that can be issued during that time. The limit works out to $14.5 billion for 1981 compared with $12 billion in 1979. However, no more than $200 million in bonds a year could be issued in any state. So those states and localities that have relied on them heavily in the past will have to cut back.

There is no limitation on the income level of persons eligible to buy houses under the program, but the maximum purchase price of the house cannot exceed 90 percent of the average purchase price in the area. Indexes for new and existing houses will be calculated separately. The maximum arbitrage permitted states and municipalities will be 1 percent.

The Treasury had calculated revenue losses at $9.2 billion by 1984 if the tax exemption had been allowed to continue unrestricted. With the limits the revenue loss in 1984 would be estimated at $2.9 billion.