May 31, 1988

LEAD: President Reagan and Mikhail S. Gorbachev publicly clashed over human rights issues today as the President, quoting Alexander Solzhenitsyn, appealed for increased civil and religious liberties in the Soviet Union.

LEAD: THE ECONOMY The housing industry has begun to retrench as mortgage rates move higher. As a result, builders are shying away from speculative projects and mortgage banking companies are laying off employees. Several leading economists predict that a 30-year fixed-rate mortgage will carry an interest rate of 11.25 percent to 11.50 percent by year-end, compared with 10.58 percent last week.

LEAD: Faced with higher mortgage rates and expecting them to rise further, the housing industry has begun to retrench.

LEAD: President Reagan walked up to Abe Stolar with a smile, shook his hand warmly, and said: ''I've just spoken to Mikhail Gorbachev about you. I told him we came from the same state and were born at the same time.''

LEAD: When Governor Cuomo appointed Paul T. Gentile as interim Bronx District Attorney last December, the expectation all around was that he would consolidate his position, sail on to win the nomination and election in his own right and become a permanent and powerful fixture in New York City Democratic politics like his predecessor, Mario Merola.