One of the most creative, bipartisan pieces of housing legislation in the past 20 years is a program of government-subsidized mortgage rates written by an avowed opponent of government subsidies.

It could bring you 11 percent loans as early as this summer--if it survives lobbyists' attempts to mangle it, hold it hostage, or kill it.

The bill is the creation of the Senate's housing subcommittee chairman, Richard B. Lugar (R-Ind.), a fiscal conservative and former mayor of Indianapolis.

Lugar's "emergency" housing legislation would:

Start an immediate program of federal interest-rate "buy-downs" for middle-income Americans' mortgages on new houses, condominiums and cooperatives already completed.

Cut the rate on up to 450,000 new mortgages to as low as 11 percent, with the federal government kicking in the difference between that and the going market rate. The maximum rate-cut would be 4 percent, or enough to save a family nearly $200 a month the first year on a new $60,000 loan.

Unlike other government programs, Lugar's would look to full repayment of the subsidy in later years, when the home was resold, refinanced or rented out by the original owner. The debt to the government would be secured by a second mortgage or deed of trust, virtually guaranteeing repayment.

Also unlike any federal-housing effort in history, the Lugar program would progressively increase beneficiaries' stakes in their own real estate via a "growing-equity" feature built into the monthly payment schedule.

Every year, the monthly payments would include larger amounts of principal and lower amounts of interest. This would cut total interest payments by home-buyers sharply, speed up their reduction of principal debt to the mortgage lender, and reduce federal subsidy payments over time.

Under Lugar's concept, the program would function as a short-term, employment-generating adrenaline shot for real estate--particularly homebuilders and first-time buyers.

It would cost about $1 billion in rate-subsidy outlays the first year (assuming the average mortgage assisted was in the $50,000 to $60,000 range). But since it would stimulate construction starts on more than 400,000 new houses, condos and cooperatives, according to Lugar, it would generate $2.5 billion in new personal and corporate income tax revenues for the federal government.

The $1.5 billion net "profit" in revenues would be the by-product of putting 300,000 construction workers back into jobs and stimulating 400,000 additional jobs in related industries. Unemployment compensation savings--rocketing in the construction industry, where nearly one out of five workers is out of a job--would add further to the fiscal gain produced by the program.

Lugar's subsidy mechanism would continue for as long as five years, or whenever national mortgage rates dipped below 12 1/2 percent for two months. (The latter automatic "shut off" valve is expressly designed to appeal to Reaganomics fans who expect rates to fall during the coming year or two.)

Why is a budget-balancer up for reelection from a politically conservative state cooking up a new federal program that hands money to people?

Lugar concedes he's been a slow convert to the idea of spending federal--as opposed to private or local--dollars to generate jobs and tax revenues.

But he explained in an interview that, "The situation out there (in housing) is frankly at a point where if we don't do something quickly, we could lose half of the home-building firms in the country to bankruptcies or forced mergers in the next year. There would be no rapid economic recovery possible--no matter whose economic viewpoints you're using--in a situation like that."

As a result, Lugar is now willing to spend some public money to generate mortgages, jobs and home sales--provided the assisted home buyers pay back what they received (with no interest) when they're better able financially.

Democrats and top Republican leaders in the Senate--including key Reagan allies--have signed on with Lugar. A Democrat on the House Banking Committee, Rep. Jerry Patterson (Calif.), has put together a similar bill on the other side of the Capitol. White House budget experts have been mulling over the numbers in the plan, but haven't formally announced their position.

What's endangering Lugar's "repayable stimulus" program is a coalition of lobbies that threatens to block the legislation on the House side unless Lugar agrees to add billions of dollars for a bailout of low-income housing. The lobbies range from socially motivated public-housing groups, with traditional alliances to the Democratic leadership, to fat-cat real estate syndicators looking for tax-shelter handouts.

Whether they succeed in holding Lugar hostage is still too early to predict. But there is a distinct possibility that moderate-income home buyers and builders could face a silent spring--getting nothing out of Congress--despite the urgent need.

NEXT: Legislative Outlook for Resale Housing