The Federal National Mortgage Association, the nations's largest single supplier of home mortgage money, has temporarily cut off further funding in the District of Columbia.

In a move disclosed yesterday that appears likely to dry up most residential lending activity in the city, the Washington-based corporation cited a recent D.C. Superior Court ruling that restricts the City Council's power to invoke emergency authority repeatedly to pass the same piece of legislation.

According to James Murray, senior vice president and chief lawyer of Federal National Mortgage, the Superior Court decision called into question the legality of existing emergency legislation that has set a 15 percent interest ceiling on home mortgages.

"Because of all the uncertainty, it was a question of whether it is prudent to make loans over 11 percent," the mortgage ceiling in previous permanent legislation, Murray said in an interview last night.

Officials of mortgage banking and financial institutions expressed shock at the action by Federal National Mortgage, a former government agency known as Fannie Mae that in 1969 became a private mortgage company. The decision, effective last Friday, is being announced in letters to mortgage firms.

One executive, who asked not to be identified, predicted last night that most other investors would follow the example of Fannie Mae and stop buying D.C. mortgages until the legality of the emergency legislation is cleared up. d

Under normal circumstances, local savings and loan associations and mortgage banking firms make agreements with individual borrowers. They then turn around and, in effect, sell many of these loans to Fannie Mae or other government and private investors.

The money the S&Ls and mortgage firms get from such sales is then used to make additional mortgage money available.

Fannie Mae's decision yesterday will bring an abrupt halt ot this practice and further tighten already scarce funds for home mortgages.

Word of the decision came on the eve of a meeting today at which the City Council is scheduled to enact permanent legislation setting an interest limit of 15 percent on home mortgages and a variety of consumer loans.

But that legislation, once signed by the mayor, will not go into effect until Congress completes a review required by the city's Home Rule Charter. uThat could continue as late as next March.

"The council can't do anything about it," John A. Wilson (D-Ward 2), chairman of the council's Finance and Revenue Committee, said last night "There is only one way it can be relieved, if the Congress waives the [review] rule, and I don't know if they are prone to do that," Wilson added.

Since limited home rule began in 1975, Congress never has overturned an act of the council. At the same time, Congress has never waived its right to review city legislation.

The charter does contain a provision, however, that permits the council to invoke emergency powers and pass legislation that remains in effect for 90 days.

It was the use of this power by the council to enact the same legislation more than once that led Superior Court Judge George H. Revercomb to rule on Oct. 19 that the city's moratorium on condominium conversions was illegal.

Although the city is appealing that decision to the D.C. Court of Appeals, Fannie Mae's lawyers concluded that the precedent may apply to the interest rate ceiling legislation, too.

Existing permanent law sets a mortgage ceiling of 11 percent. On July 3, with interest rates beginning to approach record levels across the country, the council enacted its first emergency bill removing the local ceiling entirely. It later passed a second emergency bill that went into effect Oct. 5, setting a temporary 15 percent ceiling.

Virginia and Maryland are not adversely affected by the Fannie Mae decision, since there currently are no mortgage ceilings in those states. Some lenders said the decision might even make more mortgage money available in the suburbs.

However, Fannie Mae has stopped buying home mortgages in 24 states because of interest rate ceilings in those jurisdictions that are lower than the current cost to Fannie Mae of borrowing money.

In the District, home mortgage rates quoted yesterday by those institutions still in the market were close to or above the 14 percent level.

One financial institution executive, when informed of the Fannie Mae decision late yesterday, said, "anyone who committed to buy mortgages from a savings and loan since Oct. 5 probably won't buy it now."

However, this official added, his institution would continue to agree to mortgages at the going rate of about 14 percent because "if the courts decide that City Council actions are without basis of law, the court would recognize that it was action by a legislature and that we acted in good faith."

Fannie Mae officials emphasized that if the Court of Appeals overturns the Superior Court action, thereby validating repeated emergency legislation, the company would be free to resume purchasing D.C. mortgages.