The Federal Home Loan Bank Board must revamp -- and possibly scrap -- a company it created to help the government sell property held by failed savings and loan institutions, House Banking Committee Chairman Fernand J. St Germain (D-R.I.) said yesterday.

St Germain said that the company, the Federal Assets Disposition Association, has become so riddled with problems in its first two years of operation that, instead of helping the government, it is "establishing a lavish new bureaucracy and failing to meet even minimal levels of performance.

"There is a need for early reforms if not outright abolishment of FADA," St Germain said. He said he will hold hearings next Thursday at which board chairman M. Danny Wall will testify.

The announcement followed a request by Rep. James J. Florio (D-N.J.) last week for the Justice Department to investigate FADA to see if the federal unit broke any laws when its lawyers hired detectives to investigate a real estate developer who has been publicly critical of FADA.

For months, FADA has been the target of criticism by real estate developers who say they have been unfairly denied information on how to bid on properties FADA manages. Investigations by St Germain and by Florio suggest possible conflicts of interest at FADA and, in many cases, mismanagement of properties entrusted to the agency on behalf of taxpayers, according to aides to the congressmen.

The bank board is the federal agency that regulates S&Ls. In 1985, it created FADA to help it manage the growing warehouse of property it has inherited from failed S&Ls. As a quasi-government agency, its employes are exempt from federal pay caps.

FADA President Roslyn Payne, who is exempt from federal pay limits and earns $250,000 a year plus $75,000 in bonuses, spent the last two days meeting with Wall and with members of Congress in an effort to repair FADA's image and answer accusations from real estate developers and congressional investigators.

Wall on Monday directed the agency's general counsel to draft a policy that would forbid law firms hired by FADA or any other bank board organization from hiring detectives for government business without prior approval from the bank board.

Last week, he asked the agency's office of inspector general to conduct its own investigation of FADA.