President Clinton ordered the Federal Housing Administration on Thursday to reduce up-front fees for some insured mortgages by 25 basis points.

The reduction, which will save the average first-time FHA borrower $200, caps off a three-year administration effort to reduce fees by $1,000.

"For these folks, that is a lot of money," President Clinton told more than 1,000 lenders, real estate agents, developers, and activists gathered for a summit on housing issues.

Borrowers will have to attend homebuyer education courses to qualify for the lower fees.

FHA fees were cut 25% in 1994. In 1995, 568,000 FHA loans were made, totaling $48.1 billion. Bank-owned mortgage companies - including units of Norwest Corp., Chase Manhattan Corp., and Bank of Boston Corp. - were among the leading FHA lenders last year.

Lenders praised the proposal. "Any reduction in that premium is good," said Angelo Mozilo, chairman of Countrywide Home Loans Inc., one of the leaders in the field. "Each quarter-percent reduction has a positive impact on sales. It increases the affordability index. That is good for the consumer and good for the industry."

But Mr. Mozilo said he is concerned that borrowers might have to foot the tab for credit counseling. That could eat up much of the savings from the 25-basis-point reduction, he said.

Mark Oman, president and chief executive officer of Norwest Mortgage Inc., said he expects the cut will encourage first-time homebuyers to come forward. "FHA is really focused on first-time homebuyers and their biggest challenge is down payments and cash to close," he said. "So anything to reduce up-front insurance premiums can only be beneficial."

Judy Baum, chief underwriter at Frost National Bank in San Antonio, said that although the reduction may not seem like much, the cut will grab the attention of borrowers. "It won't be a drastic change," she said. "But this coupled with some other things will be helpful."

Mr. Clinton's speech drew immediate criticism from the presidential campaign of Sen. Bob Dole, the presumptive Republican nominee.

Dole press secretary Nelson Warfield called the $200 cut "chump change," noting that a 2% drop in interest rates that occurred when Republicans won Congress saved consumers far more money.

The President had his own political spin, saying record-high deficits during the 1980s sent interest rates sky-high. That made houses unaffordable for many Americans, he said.

"We have been working for three years to reverse those trends," Mr. Clinton said. "Things are starting to look pretty good."

The fee cut will not increase the deficit, the President said. The $20 million price-tag will be offset by higher returns from the sale of foreclosed properties and by lower default rates, he said.

The President said homeownership rates jumped in the first quarter, to 65.1%, a 15-year high. The additional cuts to FHA fees should push the rate up even higher, he said.

Mr. Clinton also defended the FHA from critics who say privatizing the agency would reduce the cost of homeownership. "That is just not so," Mr. Clinton said. "If we just ended the FHA lending program, we know one thing would happen - interest rates would go up."

About 400,000 families wouldn't be able to afford homes with those higher rates, the President said.

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