The General Accounting Office and representatives of a private accounting firm hired by the Department of Housing and Urban Development told a Senate subcommittee yesterday that the government's main home loan insurance program has been forced to the brink of collapse by declining real estate values and risky underwriting.

Reports released yesterday by both the GAO and the Price Waterhouse accounting firm predict dire times ahead for the Federal Housing Administration's mutual mortgage insurance fund, which, by conservative estimates, is expected to lose $208 million during 1990.

Less optimistic forecasts of economic conditions, the Price Waterhouse accountants said, make it "reasonably possible" that 1990 losses could total as much as $667 million.

"Plainly speaking, FHA was mismanaged," said Housing and Urban Development Secretary Jack Kemp. "It was backing risky loans on the cheap."

Members of the Senate Banking, Housing and Urban Affairs subcommittee on housing, which heard testimony yesterday on longstanding problems with FHA programs, said the continuing downward slide could contribute to more significant problems in the future, on a par with the multibillion-dollar savings and loan bailout.

"If FHA reforms are needed, then let's get them out on the table as quickly as possible so we can deal with it in a manner that . . . will prevent the debacle that we have seen relating to the S&Ls," said Sen. Alfonse M. D'Amato (R-N.Y.).

Senators, who were not briefed on the Price Waterhouse report before its release, warned Kemp not to "sugarcoat" its findings. The FHA is a part of HUD.

"Let us remind everyone that FHA has an explicit guarantee by the federal government," said Sen. Jake Garn (R-Utah). "Any losses incurred by FHA must be covered by the federal government. That means the taxpayers."

John Ols, director of housing and community development issues for the GAO, predicted that risks in the FHA program could lead to "enormous costs over the life of the new insurance" that will be written in coming years. If homes appreciate at a rate of less than 4 percent per year, he said, the fund is unlikely to survive without government support.

Kemp said the FHA fund "is not now actuarially sound." But aides said he has been reviewing the Price Waterhouse study for several weeks, and he arrived at yesterday's hearing armed with proposals he predicted would improve the fund's standing.

"Had we continued in the '90s the way the system was going in the '80s, by the end of this decade there would be the type of apocalyptic prediction . . . {that scares} everybody half to death," Kemp said. "The good news is we can take steps to reverse the decline."

Kemp has proposed increasing the amount of money FHA borrowers pay for closing costs, which are now part of the financed mortgage; assessing a 0.5 percent "risk premium" on loans made with down payments of less than 10 percent; and limiting the cap placed on mortgages.

"We believe that with prompt action we can restore FHA to actuarial soundness," he said. "The situation is manageable if Congress will continue to work with us."

Subcommittee members, however, expressed concern that Kemp's proposals could have the unintended effect of shrinking the pool of low- and middle-income home buyers who can qualify for the program originally designed to aid them.

"You're increasing the price of FHA insurance and reducing, somewhat, the benefits of FHA insurance for home buyers," said subcommittee chairman Alan Cranston (D-Calif.) "If the market works . . . increasing prices and reducing benefits can be expected to reduce demand for FHA insurance, particularly among mortgagors who have greater access to alternatives."

"We could be looking back five years from now and finding that the changes did more harm than good in the long run," Cranston said.

But a coalition of community groups known as National People's Action supported the HUD proposals, saying that allowing home buyers to borrow more than their homes are worth is "morally bankrupt."

"Massive FHA foreclosures are destroying neighborhoods, not building them," NPA head Gale Cincotta said in a statement.