The Veterans Administration, facing outcries from veterans groups and Congress, this week rescinded its planned March 1 implementation of major reductions in the size and availability of VA-guaranteed loans, but made it clear that the entire loan program could be out of business by April 1 unless Congress intervenes.

The VA said it will continue to operate its home loan program until it has guaranteed a total of $11.5 billion in loans this fiscal year, a figure imposed on the program by the Gramm-Rudman-Hollings Act mandating a balanced federal budget.

Robert O'Toole, director of the VA's loan-guarantee service, said the $11.5 billion ceiling could be reached by April 1, at which point no more money would be available for the loan guarantees until the next fiscal year starts on Oct. 1.

VA officials had anticipated that more than 200,000 loan guarantees would be made this fiscal year to qualified veterans and current military personnel.

Acting VA administrator Everett Alvarez said the VA supports congressional remedies to the problem. Bills have been introduced by Sen. Alan Cranston (D-Calif.) and Rep. Richard Shelby (D-Ala.) to boost the ceiling to $17 billion for this fiscal year. The House Veterans Affairs Committee cleared legislation this week that would raise the loan-guarantee limit to $18.2 billion, and the full House is expected to take action Tuesday, according to an aide to Rep. Stan Parris (R-Va.).

At the same time, the VA also is asking Congress for an increase from 1 to 2 percent in the user fee paid at the time a VA loan goes to settlement.

Local real estate agents said such an increase in that fee could cause major problems for first-time buyers who already are stretched financially to come up with money needed for closing costs and other settlement fees.

On Feb. 6, the VA said it would limit loans to $90,000, abolish a veteran's ability to use a VA loan program more than once, halt refinancing of existing VA loans and set a March 1 deadline for loan applications. It is these restrictions that the VA has now rescinded. Lenders now limit most VA loans to $133,250.

Despite VA's change of heart, the impact on the local housing market for veterans and military personnel still will be substantial, according to builders and agents. They said the latest announcement by the VA will leave many buyers, sellers and agents in more of a quandary because they will not know exactly when the VA has reached the $11.5 billion cap.

William Laughlin, president of the Norther Virginia Board of Realtors, said, "Having such frequent and confusing changes in the procedures is detrimental to stability of information that is so important in a healthy housing market."

Warren Laskow, executive vice president of the Mortgage Bankers Association of America, called the proposed increases in user fees "outrageous.

"It's like asking for a ransom. I find no logic in it. It would constitute a tax on the veterans," Laskow said. "This is purely an Office of Management and Budget tactic to further throttle federal housing programs."

Laughlin said, "One of the things that really concerns me . . . is whether the government is going to stand behind its half-century of commitment to home ownership. Two-thirds of the American population owns their own homes. In order for the status quo to continue and increase, people are going to have to be able to continue to buy through federally supported efforts like the VA and FHA programs."

Lenders in the metropolitan Washington area said they will continue to process VA loan applications as quickly as possible and said it was important to meet the now-rescinded March 1 date in spite of the latest change in VA policy.

"This just adds to the confusion," explained Chip Sylverne of Potomac Mortgage Bankers Corp., an Alexandria lender operating throughout the area.

He said his firm plans to meet the March 1 deadline in spite of the VA changes. His company, headed by two Vietnam veterans, has set up a special hotline to answer questions from would-be home buyers, agents and those who want to refinance VA mortgages. "We are getting 20 to 25 calls an hour," he said.

The latest changes by the Veterans Administration probably won't entice veterans who were scared out of the housing market last week back into looking for a new home, according to several Arlington agents.

A Loudoun County couple who were ready to move from their three-bedroom rambler to a larger model in their Seneca Ridge neighborhood before the VA announced its restrictions said they no longer are considering selling their home and trying to buy another. The young mother of two, who declined to be identified, said her family will sit back and see what happens before making an decision.

"We are disappointed. We're good Americans. He went to Vietnam when the government called. We pay our bills on time. We did everything right," she explained.

She said she is worried that veterans who had not already moved into their first house might have to wait for years before being able to buy their first home.

Betty Plashal, an agent with Long and Foster's office in Sterling, said the VA's changing policies are "frightening." But Plashal said she is confident Congress will raise the loan cap.

"It's too popular, too good a program," she said. "Congress has got to consider the popularity of the program."