The Department of Housing and Urban Development said this week that it soon will propose new regulations that would remove the cap on lenders' origination fees for FHA mortgages, a move that could significantly boost the cost of buying a house for many borrowers.

Currently, HUD limits to 1 percent of the mortgage the fee that lenders can charge to defray the cost of making a loan. But under regulations due to be released for comment by March 1, lenders would no longer be prohibited from charging more than that amount.

Moreover, even though HUD currently permits borrowers to finance origination fees, under the new rules they would have to pay any amount over 1 percent out of pocket, according to John Coonts, deputy director of HUD's office of insured single-family housing.

The new regulations would not prohibit lenders from charging less than the 1 percent fee.

Coonts said the measure, first proposed unofficially several years ago, stems from the Reagan administration's attempt to eliminate excessive government regulation. It has received wide support from lenders, who contend that they need to raise origination fees to recover their costs.

HUD officials concede that the 1 percent fee does not cover those costs.

"The fact of the matter is that it costs slightly over two {percentage} points to originate a loan," said David Hershman, executive vice president of Wye Mortgage Co. in Bethesda.

He said many lenders now make up for the loss by charging separate fees for such items as couriers and document preparation.

Robert O'Toole, vice president of residential finance and government agency relations for the Mortgage Bankers Association of America, said that because lenders could charge varying origination fees, there would be increased competition among lenders that probably would help keep the fees low.

George Moerman, assistant director for loan policy at the Veterans Administration, said that unlike the VA, HUD does not control interest rates for its insured loans. Consequently, he said, "It doesn't make sense to control the origination fee" because lenders can keep the fees"We will oppose it pretty vigorously. It will increase costs to home buyers." -- Kate Boland, National Association of Home Builders. down in exchange for slightly higher interest rates. He said the VA intends to maintain its 1 percent loan origination fee limit.

But builders and real estate agents, led by the National Association of Home Builders and the National Association of Realtors, are planning to fight the FHA proposal because they fear that higher origination fees will cut into would-be buyers' ability to afford houses and cut into home sales. According to Mortgage Bankers Association figures, FHA mortgages accounted for 15 percent of all loans made in 1986 and 12 percent in the first nine months of 1987.

"We will oppose it pretty vigorously," said Kate Boland, staff vice president of mortgage finance for the National Association of Home Builders. "It will increase costs to home buyers. If lenders can charge whatever they can, they'll raise the fees."

She discounted the possibility that competition would keep rates down. "If that's true, we would see more competition on origination fees today. But we don't see it happening now," Boland said.

A staff member on the House Banking, Finance and Urban Affairs Committee said that first-time home buyers, many of whom obtain FHA mortgages, would be the ones most hurt by deregulating origination fees.

"First-time home buyers struggle as it is to meet down payment requirements," the congressional aide said. She declined to speculate what steps, if any, Congress might take to block the regulations should they go into effect in their anticipated form. "But from a public policy standpoint, I don't think Congress would want to sign off on something that increases costs."

HUD has the right administratively to set origination fees; thus, Congress would have to pass legislation to block implementation of any new regulations.

Wye Mortgage's Hershman acknowledged that there might be one problem with the proposed regulations. He said lenders now set a minimum amount for mortgages they make, typically between $25,000 and $30,000, because they cannot recover their expenses and make money on loans that are less than that. The housing bill Congress passed in December bars lenders from setting a minimum amount.

Consequently, mortgage companies may have to charge significantly higher origination fees for lower loan amounts to recover their costs. "If you have a $30,000 loan and can only charge 1 percent, you're only getting $300. If you have a $90,000 loan, you're getting $900 to cover costs," Hershman said. As a result, lenders "might have to charge 3 {percent} for a $30,000 loan as compared to a 1 percent origination fee for a $90,000 mortgage," Hershman said.