Sen. John G. Tower, chairman of the Senate housing subcommittee, served notice this week that he opposes efforts to raise the limits on the size of loans that the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. may buy.

Instead, Tower said he would prefer to leave the purchase of these "jumbo" loans of more than $108,300 to the newly emerging private secondary mortgage market, a market that he said will be enlarged and improved by two bills he and Banking Committee Chairman Jake Garn (R-Utah) have introduced.

Both Fannie Mae and Freddie Mac, which currently dominate the secondary market in conventional mortgages, are seeking to have the limit increased.

Fannie Mae chief David O. Maxwell told the subcommittee in May that allowing purchase of larger loans "will enable FNMA to carry out our role as a truly national provider of residential financing."

And Kenneth J. Thygerson, president of Freddie Mac, added that "the current limit of $108,300 for single-family homes has not kept pace with home prices in a growing number of high-cost areas. Equal access to the nationwide secondary market is currently not available to home buyers in those parts of the country with higher costs of living."

The secondary mortgage market has increased in importance dramatically in the past three years as volatile credit markets have forced lenders to revise the way they do business.

Traditionally, most of the nation's mortgage credit came from "portfolio lenders," primarily savings and loans. Portfolio lenders made loans and then put them in their portfolios, taking their profits from the interest payments.

But when interest rates took off, many of these lenders found themselves holding mortgages that yielded less than the lender had to pay to obtain funds. Deregulation of banking has worsened the problem, as depository institutions have had to pay much higher interest on deposits than they did in the old passbook days.

The principal alternative to portfolio lending is the secondary market. To make use of this market, the lender makes a loan as before, but instead of holding it, he sells it to a secondary buyer--principally Fannie Mae and Freddie Mac. In the process he gets money back for new loans, and transfers the risk that goes with rising interest rates to the buyer.

However, the law currently forbids Fannie Mae and Freddie Mac from buying a loan larger than $108,300, which can make it more difficult to obtain a loan for an expensive home.

The secondary market has worked well enough to channel billions of dollars into housing in the past few years. But there are fears that the current system will not be able to provide the vast supplies of capital that will be needed in the coming years.

Private "conduits" have emerged to buy mortgages, package them into securities and sell them, but because of Fannie Mae and Freddie Mac's numerous advantages--notably their ability to raise money cheaply because their bonds are implicitly backed by the government--the private firms have focused on loans above $108,300.

The purpose of Tower and Garn's bills is to enlarge the secondary market by removing many of the obstacles that make the issuance of mortgage-backed securities difficult.

One, S. 1821, would make a variety of changes in securities laws to facilitate the entrance of new players into the market and to reduce restrictions that now face many investors, particularly pension funds, that otherwise might invest in mortgae-backed securities.

The other, S. 1822, would change tax laws to make it easier to put together mortgage packages and sell the securities based on them without incurring double taxation.

And Tower made it plain that at this juncture he favors leaving the jumbo loans to the private companies as a way of enticing them into the market and getting them going.

" . . . Many state that the mortgage purchase ceiling of $108,300 absolutely must be lifted for Fannie Mae and Freddie Mac. The argument goes on to point out that these high-cost, or jumbo, mortgages must be available to Fannie and Freddie for purchase in order to provide housing liquidity for this end of the market, lower interest rates, and to sustain the housing recovery," Tower said.

"My own personal view is that this argument is somewhat exaggerated," he added.

"I agree heartily with those who want liquidity in the jumbo market, high-cost relief for the home buyer. However, in my view, S. 1821 and S. 1822 will provide this relief, and I urge all the parties to evaluate this rather carefully."

"Two years ago, private-sector alternatives did not exist. Now they do. Let's encourage this private market to grow, produce, and in so doing serve the home buyer in the higher brackets."

Joking about what an unusual circumstance it was, Sen. William Proxmire (D-Wis.) said he was very much in agreement with Tower, complimenting him on "a very, very persuasive case for not raising those ceilings."