Within the month New York City is expected to sell its first issue backed by city-owned mortgages. If the initial $100 million offering and a second similar one are successful, the financially troubled metropolis will be somewhat relieved - and somewhat richer.

So will two Washington men who helped engineer the sale.

Last year, while the Municipal Assistance Corp. was making headlines with its Big MAC bonds, another team was quietly working on a lesser known part of the financial package designed to pull the Big Apple back from the brink of bankruptcy. The task was to convert $1.2 billion in high-interest, uninsured, delinquent mortgages the city owns on public housing into federally insured, economically sound mortgages that would be attractive to private investors. To a lesser extent, New York State is engaged in a similar refinancing scheme.

In addition to municipal, state and federal officials, the team includes Washington Milton A. Abrams, president of the Urban Real Estate Finance Corp., and attorney Philip Brownstein, senior partner of the Brownstein Zeidman Schome and Chase law firm.

Abrams, who has been involved in the financing of more than $1 billion of multifamily, government-involved housing over the last 20 years, processed the applications on behalf of the city for submission to the Federal Housing Administration and counseled city and state on a new refinancing program. Brownstein, a former FHA commissioner, handled the loan closings. Together they handled negotiations with the federal government.

Asked why two Washingtonians were chosen for the New York team, first deputy mayor Donald Kummerfeld (who was the city's budget director until recently) replied, "We didn't have (their) expertise on the city payroll. We would have preferred to keep the money here (by hiring New York firms), but since little FHA mortgage insurance is written in New York, out-of-towners were needed."

Kummerfeld said that most companies turned down the contingency offer "when there was only a 50-50 chance they would get paid." Brownstein and Abrams now stand to make several million dollars in fees and commissions.

In a recent interview, Abrams said he undertook the task "because I've always been a foolish optimist" and "all the ingredients were there." Maybe so, but back in the winter of 1975-76, the recipe - and in some cases the utensils - for those ingredients had yet to be invented.

The so-called "Mitchell-Lama" mortgages, on which the upcoming offerings are based, are named for the site who sponsored the 1955 bill permitting state and city to finance apartment house construction for low and moderate-income tenants at long-term low interest rates from tax exempt bond revenues.

It worked well at first, but as New York's increased borrowing pushed up interest rates, the city had to finance new projects with short-term notes with a 9 per cent interest rate instead of the original 3.5 per cent. The projects, owned by non-profit and religious organizations, could not raise controlled rents enough to pay th e mortgages. By 1975, 90 of the city's Mitchell-Lama were in arrears.

In order to sell these mortgages - or use them for collateral - as part of the fiscal rescue package, it was necessary to get FHA insurance. To insure the mortgages, it was necessary to amend state laws so that the state (or city) would underwrite 5 per cent of the mortgages, while another 85 per cent was insured by FHA, over a 40-year period.

Participants recall frantic dashes to Albany, including one legislature session where Gov. Hugh Cary signed a bill at 11:45 p.m. to make a transaction legal by the midnight deadline. The action broke new ground: for the first time previously uninsured, subsidized apartment blocks could be refinanced with government backing. For other cities in desperate financial straits, it offers possible relief.

After evaluating the properties, federal inspectors determined that the city's mortgages were worth about 62 cents on the dollar, whereas the state's more economically viable mortgages could be insured for 87 per cent of their $260 million face value.

The first state mortgage sale took place in June 1976, the first city sale, in February of this year. To date, five muncipal mortgages on multifamily residencies for low-income and elderly households have been sold for a total of $22.5 million. These are included in the total of 24 city and state mortgages, worth approximately $125 million, that have been refinanced in preparation for the bond sale.

The decidion to use the mortgages for collateral rather than to sell more outright came from the realization there was more money to be made in going the bond route. "When we sell a mortgage, it's gone and we can't get anymore out of it," said Harold Kuplesky, executive director of the city's Housing Development Corp., which issues the bonds.

At first Mayor Abraham Beame announced the city could expect $410 million by last June from the bonds, but Kuplesky is now talking about realizing $300 million over a much longer period. He has commitments from six New York banks to purchase $100 million by Dec. 31 and another $100 million by March 31. There is good possibility of an addition $100 million, Kuplesky said last week.

Last spring New York Magazine commented on the continues shrinkage. "The mortgage sale is an example of how our politicians can claim triumph from a deal that represents a terrific shellacking for the city." It added. "This part of the moratorium package will have none of the financial frenzy of the note (MAC bonds) swap and nobody is going to make any unusual money on it - except, of course, some lawyers."

Brokers, the magazine noted, took home more than $5 million in commissions on that swap. With 60 more city and 20 more state refinancings anticipated, the firms of Abrams and Brownstein could take home a maximum of about $1.9 million and $700,000 respectively. Abrams' contract grants him 0.5 per cent commission on the first $150 million in the face value of the new loan; 0.4 per cent for the next $150 million in the face value of the new loan; 0.4 per cent for the next thing over that. Brownstein is paid on a sliding scale: $9,000 for the first 15 closings, $7,000 for the next 20 and $5,000 for each thereafter.

Though these sums seem large to the layman, experts in the field say they are well below market value. Abrams put in the lowest bid of half a dozen firms.

Brownstein's law firm fee was well within the 2 per cent FHA allows.

"The fees were entirely reasonable, considering there was no precedent," said Bob Cunningham, head of the FHA underwriting team. "It was the biggest closing we've ever had."