The nation's hottest legal fight over residential real estate -- one that could directly affect your ability to buy or sell a home -- is rapidly filling federal and state courts with lawsuits as it heads toward the U.S. Supreme Court.

In some states it is also producing political action and consumer crusades, ranging from constitutional referendums to angry picket lines.

The issue is a knotty one: Should local mortgage lenders, who have been regulated by the federal government since the Depression, be required to adhere a new generation of state reform laws designed to alter their traditional relations with home buyers and sellers?

Specifically, should new state laws that curtail S&Ls' and banks' powers to raise interest rates on home loans at the time of assumption -- or to demand payment in full if a loan is transferred in any way by a borrower -- have legal standing?

Should an S&L in states such as Georgia or Colorado, where legislatures have enacted laws prohibiting any lender from raising interest rates more than one percentage point on loan assumptions, be allowed to flout the law and raise a 7 percent loan to 14 1/2 percent, no matter how creditworthy the new buyer?

Should S&Ls in Virginia, Michigan, California, New York, Florida, New Jersey and more than a dozen other states be allowed to foreclose against homeowners, simply because they sold their homes in 1980's depressed market using land contracts and similar "creative" devices?

The U.S. agency that regulates the nation's federally chartered S&Ls and savings banks has just cleared away any doubts about its legal view of this issue. In an unusual intervention in 15 lawsuits before a federal district court in Michigan, lawyers for the Federal Home Loan Bank Board said that the agency's rules -- not state law -- take precedence.

If an S&L wants to protect itself against increases in interest rates by invoking the "due-on-sale" clause contained in its standard mortgage documents, and decides to double the interest rates to buyers assuming loans, the board will defend its right to do so.

If an S&L operates within a state that has adopted a law that expressly limits such rate hikes, it doesn't matter. The bank board's regulations, not the legislative will of the state, will be the controlling factors. And the board's regulations allow accelerations of rates without limit.

The bank board's lawyers based their federal "pre-emption" argument on the 1933 Home Owners Loan Act, which they said gives the board the exclusive right to regulate the S&Ls it charters.

The 15 cases in Michigan, all involving accelerations of mortgage rates or foreclosures by Detroit's largest S&L First Federal Savings and Loan Association, are typical of the dozens of fights brewing between home sellers, buyers and mortgage lenders across the country.

Along with suits in California, Georgia, Flordia and Colorado, the Detroit cases are virtually certain to end up before the U.S. Supreme Court, no matter what the federal district court decides. Lawyers representing S&Ls, realty brokers, home sellers and buyers agree that the issue is fundamental and requires a clear, final national decision.

"We've got to get this whole thing before the (U.S. Supreme) Court," said Lawrence Watson, a Florida attorney handling four separate suits against S&Ls that have blocked assumptions or tried to foreclose on unwilling sellers.

"Home buyers and sellers are being screwed by lenders on rates," Watson said. "Most homeowners had no idea when they got their 8 or 9 percent loan from the S&L a couple of years ago that there was some language buried away in the documents that would prevent a qualified buyer from taking over thier loan at the same rate. Nobody from the S&L warned them about that, and that's bad business."

In Georgia, where the state legislature took special care to cover all S&Ls in its restrictions on rate increases for assumptions, lawyers representing angry home sellers say the issue is a classic state's rights confrontation.