Presidential candidate Michael Dukakis' proposal to expand FHA lending will "serve higher income families, not the low and moderate income families he wants to help," said William H. Lacy, president of the Mortgage Insurance Companies of America (MICA) trade association.

"MICA supports Dukakis' plan to allow home buyers to use monies invested in an individual retirement account for a down payment," Lacy said. "However, allowing FHA loans to rise to 95 percent of the area median will contribute to rising house prices, serve more trade-up borrowers than first-time buyers and draw government support away from low and moderate income households."MICA, the trade association for 12 private mortgage insurers, believes FHA lending should be guided by income, not median house prices.

Lacy said housing policy should focus on the needs of home buyers and not homes that need to be sold.

"We believe that housing policy should not only help borrowers purchase a home, but also should evaluate the long term ability of that borrower to stay in his home.

He said government assistance in high-cost areas can only help those wealthy enough to afford median priced homes.

For example, in a high-cost area such as Boston with median home prices above $195,000, the income needed to qualify for an FHA loan at 95 percent of the median price is $86,000.

"These are not typical first-time buyers' incomes, nor are they people who need a government subsidy to purcahse a home. Dukakis' plan will not help young school teachers, automobile workers, police and many others buy a home," Lacy said.

He cited figures showing fewer FHA loans going to lower income borrowers. In 1986, 42 percent of the borrowers receiving FHA loans had income over $40,000, a figure which was approximately 140 percent over the U.S. median househod income.

Lacy said MICA asks that government focus its housing policy on the real needs of first-time buyers by targeting federal subsidy programs based on a borrower's real income, not on median house price.

"Income is a far better measure of the need for housing assistance in every market area."