The Consumer Product Safety Commission's decision this week to ban all sales of insulation made with formaldehyde brings gloomy news to the half million energy-conscious consumers nationwide who have installed this product in their houses.

For although the ban will help protect consumers in the future from what the commission deems an unreasonable heath risk, it will do little to aid homeowners who installed urea-formaldehyde foam insulation during the late 1970s as part of the government's campaign to get Americans to conserve energy.

Although a similar ban in Canada led to a $110 million government-assistance program--up to $5,000 a home--to help owners reduce some of the risks associated with this product, the CPSC has not set up such a program, largely because it lacks the funds and power to do so.

"We don't have the authority under the law to get redress for the houses that already have been insulated" with formaldehdye foam insulation, said Commissioner Sam Zagoria.

As a result, thousands of homeowners will continue to be exposed to a chemical that the commission has called a potentially cancer-causing agent. At the same time, owners may also face a decline in the resale value of their houses, with potential buyers refusing to purchase any house that contains the controversial product.

"People who read a lot and are concerned about health wouldn't buy a house with this kind of insulation," said local appraiser Judith Reynolds. "I would never own such a house," she added.

Consequently, she predicted, houses with formaldehyde foam "will tend to suffer somewhat in value, especially in this kind of market," when so many houses are up for sale.

Just how much houses will decline in value is in dispute. Josh Lanier, executive director of the trade organization that represents installers, predicted that the ban could devalue a house with UF-foam, as it is commonly called in the industry, by $6,000 to $20,000. Removing UF-foam can be a very difficult and costly task--as much as 10 times as much as the cost of installation, or between $12,000 and $14,000 for an average-size house.

Commission officials, however, question these figures, saying that earlier bans on UF-foam in Massachusetts and Connecticut have not produced such drastic devaluations.

The commission's ban will not take effect for at least another five months. Thus, commission officials warn consumers that formaldehyde foam will still be legally sold in many areas across the country. If consumers are concerned about the health risks, the commission added, they should make sure they avoid UF-foam. They should also avoid a product called tri-polymer foam insulation that also contains formaldehyde and, under the commission's action, will also be banned at the end of five months.

Behind the ban are concerns about the adverse health effects of UF-foam, which in many cases has released formaldehdye gas after it has been installed. In humans, formaldehyde is known to cause a variety of adverse health effects, ranging from nausea to headaches and dizziness to eye and skin irritations. Additionally, industry tests have shown that formaldehyde causes cancer in animals.

It was primarily the fear of cancer that led the CPSC to ban UF-foam as an "unreasonable health risk."

Even so, commission officials now tell homeowners that have UF-foam in their homes not to panic and pull out the insulation for fear of cancer.

"If you've got it in your house and have not experienced any health problems, forget about it," advises Harry Cohen, the CPSC's program manager for household structural products.

The chances of incurring any immediate adverse health effects are probably long past, Cohen says. The risk of cancer, he adds, "while a concern for the population as a whole, is very small for any given home. The chances of getting cancer from living in a home with UF-foam is less than one in 10,000--probably no greater than walking across the street."

Additionally, CPSC officials note, the release of formaldehyde from UF-foam decreases with age. "After a year, two years, the risk really decreases," said Dr. Peter Preuss, CPSC's director for health sciences. His advice to homowners who have had UF-foam for several years is "Don't panic."

Unlike other forms of insulation that are made at factories and then installed in individuals houses, UF-foam in made at the site of each home by combining formaldehyde resin, a foaming agent and compressed gas. Ressembling shaving cream, the foam is then pumped into spaces between the walls of the house where it hardens to form a layer of insulation.

Given its ability to reach hard to reach places without having to tear down walls, UF-foam has proven particularly popular for older houses. However, once hardened, it is extremely difficult to remove, particularly if the house has plaster walls.

To find out how how much formaldehyde is in a house, CPSC officials advise homeowners to contact their local, county or state health departments to see if they will test the atmosphere in their homes.

Another option available to consumers has just been made available by 3M Co., which has just developed a formaldehyde monitor to measure the air of a single room. The consumer can obtain the device for about $35, place it in a given room for 24 hours, and then return it to the 3M company, which will analyse the badge and return a report to the consumer within five working days.

The device, 3M officials say, will measure concentrations as low as 0.1 part per million.

Any level close to that or higher is cause for concern, CPSC officials say.

If homeowners or their families have experienced problems, CPSC officials advise them to contact their physcians first and closely follow his or her recommendations. If the doctor finds that the health problem is related to formaldehyde, then the homeowner should contact the installer and ask what corrective actions he is prepared to take to reduce the level of formaldehyde in the home.

If the installer fails to take action, then the homeowner can reduce the level of the chemical by taking several steps. Short of taking the costly step of removing UF-foam, the commission suggests a number of alternatives, but stress that all are untested by the commission.

The remedies include:

* Sealing the inside walls as much as possible to prevent the formaldehyde from being released inside the house. To do this, repair all holes, cracks and gaps in the wall with UF-foam with caulking or spackling compounds, apply two coats of water-barrier paint to the wall and install vinyl wallpaper over the paint. Also make sure electrical outlets are insulated from the UF-foam by installing a cork-like gasket underneath the plate. Weatherstripping or sealants should also be used to seal the junction between the wall and floor.

* For inside walls made of paneling, plywood or particle board, applying a sealant to the wood surface to reduce emissions. Possible sealants include a vinyl acetate solution, clear polyurethane, latex base synthetic emulsions and alcohol and ester base products.

* Absorbing the gas by placing ammonia in the room. CPSC says that ammonia gas has been used in Europe to reduce formaldehdye levels by 50 to 60 percent. However, the commission notes, it "is an irritant and also may not be desirable for indoor use.

* Purifying the air by circulating the air through a special filter that will oxidize the gas.

* Opening window and air vents to bring fresh air in from the outside to reduce the formaldehyde concentration in the living area. A heat recovery exchanger, which brings fresh air in from the outside and then heats the air to room temperature, may be the best approach here if homeowners don't wnat to face increased heating costs.

Should all these fail, then consumers may have to remove the UF-foam. Even then, the commission notes, the gas may be trapped in the house and released at a later date. As a result, commission officials suggest homeowners use a special scrubbing treatment containing 3 percent sodium bisulfite to clean all surfaces that were in contact with UF-foam.

The CPSC will answer any questions on its toll-free hotline, 800-638-8326. For Maryland residents, the number, in Bethesda, is 301-492-8363.