President Clinton, addressing one of the most contentious issues in mortgage finance, made a personal appeal on Monday to raise the maximum size of home loans insured under a large federal program.

In a hastily scheduled appearance before the Mortgage Bankers Association of America, the President pointedly affirmed his support for legislation to let lenders make loans of up to $227,150 through the FHA insurance program, up from $170,000 now.

"We can pass it, and we must," the President told a wildly cheering audience.

The measure-supported by lenders but opposed by private mortgage insurers-was proposed by Housing Secretary Andrew Cuomo and incorporated in the budget that President Clinton presented to Congress last month.

The President is pushing the plan as part of a broader effort to increase homeownership.

"A record two-thirds of Americans ... now live in their own homes, and we must finish the job," Mr. Clinton told attendees of the mortgage group's annual legislative conference Washington. The administration aims to raise the rate to 67.5% by the year-2000, from 65.7% now.

Under the FHA program, which began in the Depression era and is named for the former Federal Housing Administration, private lenders originate and service loans and the government provides guarantees against credit losses. The loans are an alternative to privately insured mortgages.

On Monday the trade group for insurers dismissed the President's appearance as political grandstanding.

"It's nice to have the President speak at your conference, but I don't think it will have any effect," said Suzanne C. Hutchinson, executive vice president of the Mortgage Insurance Companies of America.

"I just don't see any support for it," she added.

The proposed loan ceiling-identical to the maximum for loans sold to Fannie Mae and Freddie Mac-would replace a system of different limits for different markets. High-cost areas like California and New York now face a ceiling of $170,000.

The change would markedly bolster the FHA's role in guaranteeing mortgages to middle-class homebuyers. The program predominantly finances minority, lower-income and first-time homebuyers.

Though a similar proposal in the 1998 fiscal year budget died a quiet death, a representative of the National Association of Realtors said Mr. Clinton's speech would prod Congress to expand the FHA.

"I think he (the President) did something that hasn't been done in a long time," said Jerry Giovaniello, vice president of government affairs at the Realtors group.

"He connected the homeownership goal of 67% with actions that Congress can take," Mr. Giovaniello said.

Along with mortgage bankers, who get higher fees on the government- backed loans, the President's proposal is supported by Realtors and home builders.

Despite paying for losses on loans that default, the FHA program turns a profit, which it contributes to the federal budget. The new loans would be especially profitable because they would be made to lower-risk buyers, supporters say.

The private insurers dispute that. They say low-down payment loans to higher-income borrowers are riskier than such loans to lower-income borrowers.

Mr. Clinton devoted the bulk of his speech to criticizing a bill sponsored by Rep. Steve Largent, R-Okla., that would abolish the tax code. President Clinton said the bill would eliminate features such as the mortgage interest deduction, and asked the mortgage bankers to lobby against it.

The Speaker of the House, Rep. Newt Gingrich, R-Ga., will speak to the MBA meeting today , and the group is likely to solicit his support as well for an expanded FHA.

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