State Sen. Laurence Levitan (D-Montgomery), a prime sponsor of legisiation designed to increase the availability of home mortgage financing in Maryland, earns thousands of dollars in legal fees annually from a large mortgage banking firm whose loans he reviews.

The amount Levitan earns in legal fees is based directly on the number of home mortgage loans given out by Suburban Coastal Corp., a New Jersey-based mortgage banking firm that Levitan represents in Maryland, Virginia and the District of Columbia.

The emergency legislation Levitan co-sponsored would lift the existing 10 percent ceiling on mortgage interest rates in Mayland. With interest rates around the country climbing, that ceiling has made home mortgage loans an unprofitable investment for many Maryland banks, and as a result home financing has become difficult to obtain.

In a mortgage market free of interest rate restrictions, a company like Suburban Coastal would be expected to increase the number of mortgage loans it could make and send its counsel more cases to approve.

Levitan's law firm receives a $75 fee for every transaction he reviews for Suburban Coastal. In an interview yesterday, Levitan said, he handles "at least several hundred" home mortgage loans annually for the New Jersey-based firm.

Levitan yesterday denied that his sponsorship of the legislation and his work steering it through the Maryland Senate last week represented a conflict of interest.

"I don't consider this [legislation] because it benefits me or Suburban Coastal," he said. "I consider it because I think it's right for everybody... I vote my conscience."

Under the rules of the General Assembly, a legislateor is presumed to have a conflict of interest if he accepts a "payment of significant value" from an individual or firm that financially would benefit from vote on legislation.

Such a conflict should disqualify a legislator from voting on or sponsoring legislation from which he benefits, unless he files a sworn statement disclosing his interests with the legislature's joint ethics committee.

No such sworn statement has been filed by Levitan, who said that he has no conflict in connection with the legislation because the measure benefits not only Suburban Coastal but all firms and individuals hurt by today's critical shortage of mortgage money.

"I don't believe this is a special interest bill for the banking community. I believe this is a special interest bill for the economy of the state of Maryland.If the economy benefits, everybody benefits, including us [his law firm]," Levitan said.

Nor does Levitan believe that he has a conflict of interest in two other areas relating to this legislation. The Montgomery County Democrat seven months ago obtained a state mortgage broker's license enabling him to receive commissions for helping real estate investors find financing for their projects.

In addition, Levitan owns 50 shares in a commercial bank -- Suburban Trust Co. -- which, like Suburban Coastal, makes home mortgage loans and would benefit from this legislation.

The Senate bill, which would lift the 10 percent interest rate ceiling on home mortgages, won final approval in the Senate last week and is now being considered by a House committee.

The mortgage interest rate bill has been the most heavily lobbied measure considered in this General Assembly sssion, drawing the strong support of the banking, building and real estate industries.

A bill that touches so many economic groups presents an ethical dilemma for many of the 188 part-time legislators who come from a variety of professional and business backgrounds.

When the Senate gave its final approval last week to Levitan's bill removing the 10 perecent interest rate ceiling, the list of supporters included two officers of savings and loan companies that would benefit from the bill -- Sens. Jerome F. Connell Sr. (D-Anne Arundel) and James C. Simpson (D-Charles).

In addition, several realtors also voted in favor of the measure.

Simpson and Connell both disclosed their interests in the savings and loan firms in financial disclosure statements filed with the Secretary of State, but did not file sworn statements with the joint ethics committee of the General Assembly.

Simpson and Connell both said yesterday that they feel their postitions as officers and depositers in the savings and loan firms represent no conflict because they get no more benefit from the legislation than numerous other depositers in the same firms.

Levitan has filed a financial disclosure statement with the office of the secretary of state in which he lists his ownership of the 50 shares of bank stock. As an attorney, heowever, he is not required to reveal the identity of his clients and he did not do so.

Three other senators -- Chales H. Smelser (D-Carroll), Aris T. Allen Jr. (R-a/nne Arundel) and Tommie Broadwater Jr. (D-Prince George's) -- abstained from voting on the mortgage interest bill, explaining that their affiliations with the banking industry may be seen as a conflict of interest.

Levitan, a two-term senator who this year was elevated to the chairmanship of the powerful Budget and Taxation Committee, said yesterday that if he abstained on all legislation affecting his clients he would have to excuse himself from "50 percent of the legislation I vote on...

"I just can't sit down on each case and decide how it affects each client," Levitan said. "In a part-time legislature, if the people who had potential conflicts refused to vote, you wouldn't have any legislation passed."

Levitan said that the experience he has gained representing realtors, builders, home buyers and bankers -- who altogether represent about one-third of his law practice -- gives him the background to paly a useful role in the legislature as an expert on home financing.

"I work with it [the mortgage business] and I understand it," he said. "I think that makes a contribution to the legislature."

The disclosure and disclaimer provision offered by the Joint Committee on Legislative Ethics is designed to inform a legislators' colleagues and constituents of any outside interest that might affect his judgment on legislation.