The federal government may renege on a promise to pay mortgage insurance premium refunds to hundreds of thousands of borrowers participating in its Federal Housing Administration home loan program.

A proposal to suspend payment of what are known as "distributive shares" to borrowers who took out FHA mortgages before September 1983 is about the only uncontested piece of an FHA reform package now before Congress.

A borrower who pays off an FHA mortgage without defaulting is entitled, under a complicated formula, to a proportionate share of any surplus the fund is running for the year the loan was originated.

About 145,000 borrowers each year would lose out on distributive share refunds that typically amount to $900 to $1,000 each, according to the Department of Housing and Urban Development, which oversees the FHA mortgage program.

Typically, each year's fund does not accumulate a surplus until the mortgages are at least seven years old. Consequently, most of today's distributive share recipients probably took out their mortgages in the 1970s, according to HUD.

The FHA fund, which serves as a reserve against loan losses, is losing $350 million a year because lender claims for reimbursement of defaulted mortgages in the 1980s have outstripped borrower premiums collected for that period.

Suspension of the refund program until the fund returns to solvency, which will probably not occur until the year 2000, will save about $150 million a year.

Until 1983, FHA borrowers paid their mortgage insurance premiums in monthly installments equal to 0.5 percent of the unpaid balance, rather than as an upfront lump sum as is the practice now. Post-1983 borrowers who retire their mortgages are unaffected by the legislation and will remain eligible for a prorated premium refund.

If the housing measure is enacted, which could be later this year, any pre-1983 borrower who subsequently pays off a qualifying FHA mortgage will lose the right to claim a distributive share refund.

Unlike other FHA provisions contained in the reform portion of the housing bill, the refund deferment measure enjoys broad support. The Bush administration, both chambers of Congress, the housing trade groups and at least one consumer group have all lined up in support of curtailing the payments.

Michelle Meier, government affairs counsel for Consumers Union, a 300,000-member consumer group, said that from a public policy standpoint, it makes sense to ask borrowers who already have benefited from the FHA mortgage program to share in the cost of restoring it to financial solvency.

The alternative, she said, is to impose higher down payment requirements or higher mortgage insurance premiums on prospective homeowners who can least afford it. Other FHA reforms contained in the legislation already move in that direction, she noted.

"Rather than make up for that deficit only through burdening future borrowers, I think a balance between the past and future makes sense," she said.

The way the distributive share program is structured, said John C. Weicher, HUD's assistant secretary for policy development and research, is a "funny way" to run an insurance program. A less arbitrary approach, he said, is to calculate losses and surpluses for the entire FHA book of business, rather than on a year-by-year basis.

"We paid distributive shares to people who paid off their mortgage in 1978 on the basis that FHA was not losing money and we did not need that money. Suddenly, we found in 1980 that we needed that money" because economic conditions changed, Weicher said.

The $150 million in savings from such a move would cover about half of what the fund is losing each year, said Norman B. Flynn, president of the National Association of Realtors and a Madison, Wis., real estate broker. "You can go a long way {toward solving the problem} in a manner that is relatively painless," he said.

Homeowners who bought their houses with FHA-insured loans are not likely to miss the money, said Brian Chappelle, a staff vice president with the Mortgage Bankers Association of America "because they never count on receiving it. They know it is coming to them {through lender mailings} but it never clicks."

According to Weicher, HUD has had "no indication that FHA buyers in any numbers feel that this is unfair."

Nor has any interest group come forward to object to the provision, added Bill Warfield, a House housing subcommittee aide.

However, Tom Schraw, housing coordinator for National Peoples Action, a low-income housing advocacy group based in Chicago, said he believes Congress is raising money to shore up the FHA fund by taking on an "easy target, the unorganized" refund recipients.

Schraw's group has not taken a position on the distributive share issue, but, he said, "It is kind of a bum deal" for potential recipients. He added, however, that he can accept the cutoff as a lesser evil than the alternative of asking future FHA borrowers to pay more money to obtain these loans.

The proposition amounts to "ripping off the public," said the head of a private company who tracks down missing distributive share recipients. The executive, who requested anonymity, said the elderly, who make up his largest client base, will be particularly affected.

The federal government, he said, is violating its compact to refund the premiums and is instead trying to use money made at these borrowers' expense to unfairly benefit later participants in the program.

What's more, he said, if the measure becomes law, "I am out of business."