When attorneys Edward and Sherrie Black decided to repair their spacious but dilapidated home on Logan Circle NW, adding in the process a roof deck and sauna, and restoring the eight fireplaces, they found a banker who was offering perhaps the lowest interest rates and the longest repayment terms in town: Uncle Sam.

When Robert and Constance Maffin wanted to make major mechanical wiring and plumbing improvements and add a staircase to their nearby home they went to the same lender.

Maffin When he isn't stripping woodwork and painting walls is the executive director of the National Association of Housing and Redevelopment Officials. Earlier in his career, he ran low-interest loan programs in California.

The Blacks and Maffins have been joined by real estate agents, top government workers, lawyers, urban planners, builders, architects, and numerous other middle-income and lower-income Washingtonians who have gone to the government for help in fixing up their rundown homes.

They are participating in a controversial and extremely popular housing program established 14 years ago at a time when many middle-class people were fleeing the cities. It was designed, according to the legislation, to help people who couldn't otherwise afford to fix leaky roofs, repair sagging stairs and generally rehabilitate homes in blighted neighborhoods targeted to teceive other local and federal aid.

Borrowers get 3 percent interest, 20 year loans at a time when home improvement loans at some private lending institutions have risen to 11 1/2 percent interest over 7 years.

Critics charge that the program-known officially as Section 312 and established in 1964-was never intended to benefit more affluent persons, particularly in cities such as Washington where extensive private renovation already is under way in deteriorating city neighborhoods.The program has no income limits.

Sen. William Proxmire (D.Wis). chairman of the Senate Committee on Housing, Banking and Urban Affairs has tried unsuccessfully in the past to put a $20,000 annual income ceiling on borrowers according to Michael B. Barton, special counsel for the housing subcommittee.

Proxmire said he considers the loan program a "good program that can do wonders for neighborhoods" but one that can be ruined if money isn't designated for the most needy.

"Some of the people getting the loans have incomes of $50,000. I know of one husband and wife (in Washington) who each make over $30,000 a year." Proxmire said. "We must provide assistance for people who really need it."

Added Barton: "We never thought upper income people would take advantage of it. The potential for (Section) 312 development loans to upper income people is very clear in this city."

This year legislation was passed allowing HUD to charge upper income people interest rates higher than 3 percent of the loans. Officials at the U.S. Department of Housing and urban Development opposed the change, contending that it would complicated a simple, straightforward program.

According to Robert C. Embry Jr., assistant secretary of HUD for community planning and development the loan program was designed not only to help lower income families rehabilitate their homes but also to attract middle-income people into low-income city areas. "It was a way of improving rundown areas of the city and ensuring a mix of income levels." Embry said.

Such a program he addes "is not needed on Capitol Hill but it is needed in the South Bronx" Embry and others said that perhaps the country's most successful program is in Baltimore, the city where Embry used to be housing director.

HUD is currently considering whether cities such as Washington need to be restricted in their use of the program.

Some cities have turned around so dramatically there is no need for 3 percent loans in their neighborhoods." Embry said. "We may have to say to some cities that they don't use the money for anyone except low and moderate income persons unless they tell us why for each individual case. . . . The District is unusual. Most of the other cities getting the funds are experiencing an outmigration of people." Embry said.

One recent HUD report noted that about 70 percent of the loans nationally went to borrowers whose annual incomes were below $20,000. Statistics demonstrate "that a substantial portion of the loans are going to low and moderate income property owners, but not as much as we feel is appropriate," the report said.

Embry acknowledged that some people have the impression that the rehabilitation loan program primarily benefits middle-income whites. But he added. "They are people who ignore the statistics. . . . A recipient making $40,000 a year is the exception. You also have to remember that the lawyer who is making $40,000 who fixes up his property also is paying property and income taxes and reducing the tax burden of the persons complaining about it."

According to HUD figures from 1977, 63 percent of the more than 5,000 loans approved went to whites. The District of Columbia refused to release racial or income information about individual borrowers.

Through a Freedom of Information Act request, the District Housing department did provide the names and addresses of borrowers approved for the program since December 1976 and other limited information including the work planned for some the homes.

Families use the funds in various ways. Many are having major mechanical and electrical repairs made, while others fix concrete walks or install storm and screen windows and wrought-iron handrails. Some of the loans have gone to lower income Seaton Street families to help them fix up the homes they bought to stave off eviction. Some are providing apartments for low and moderate income families.

In the past, at least 80 percent of the rehabilitation loan had to be house meet basic housing code standards. Under new HUD regulations this fall that requirement no longer exists.

Many borrowers receive in addition to Section 312 loans additional money from other public programs including low-interest loans from the city's community development block grant allocation from HUD. Some also have received outright grants through a program that no longer exists.

Abraham Greenstein, deputy administrator of D.C's Neighborhood Improvement Administration, defended the granting of loans to upper income families in Washington for the restoration of houses in rundown city neighborhoods.

"We think this is one of the most important things we ought to be about," Greenstein said. "There's not a higher priority that we have. We would like for the program to remain flexible."

Greenstein said most of the city's funds are being used to help persons whose incomes meet the guidelines set up for an older housing program. That program allows funds for families who earn less than 95 percent of the metropolitan area's median income or less than $21,400 for a family of four.

In Alexandria, city officials have put together their own low-interest home improvement loan program for lower income families by using money from private banks and federal community development block grant funds.

Now that HUD is stressing the idea of targeting 312 funds primarily for poorer families. Alexandria may begin to participate in it, according to a city official. "We will take another look at it." the official said. "It makes the program more attractive."

Many of the larger loans in Washington have gone to persons restoring the large houses around Logan Circle, which are so large they often contain several apartments. An owner can borrow up to $27,000 for each unit in residnetial property.

The Maffins who own 1324 Vermont Ave. NW. have three apartments in their house that they rent out at prices ranging from $250 to $435 a month according to Maffin. His wife is an urban program specialist involved in real estate, he said.

Maffin conceded that his and his wife's incomes put them in a category "that some people would consider the program wasn't designed for." They received a $69,600 loan.

Maffin heads a housing organization that for several years has supported the idea that interest rates on Section 312 loans should take income into account. As a result, said Maffin, he debated whether or not he should apply.

But he decided in favor, obviously. "The property will be a permanent asset to this community." Maffin said. "We decided the money should be used to fix it up."

The Blacks bought their home at 5 Logan Cir. three years ago for $70,000. They are getting an $81,000 3 percent interest. Section 312 loan plus a $558650 8 percent interest loan from the city.

When renovation is finished their house will be worth more than $275,000 according to city housing files. The Blacks have moved elsewhere while work is in progress, but they plan to make the Logan Circle house their permanent home said Sherrie Black. They will have two apartments to rent out at market rates, one probably for about $400 a month.

Sherrie Black is a lawyer with the National Labour Relations Board. Her husband is a lawyer with the Department of Commerce.

The Blacks moved into their rundown home which once contained seven apartments in the spring of 1976. On the day of settlement, the furnace broke down, and later their roof flew off. "It really was camping out," she said of the experience. "It was an emotional and financial investment. Somday, it'll be nice."

The Blacks applied for their loan in August 1975. Finally, in June of last year, they were told loan funds were available, and were given two weeks to come up with specific plans. They settled their loan in March of this year.

While waiting for their money the Blacks refinanced thir house in order to get some cash with which to start the work.

They and others have had serious problems getting funds from the city quickly. The Blacks said they submitted a voucher to the city near the end of May for a portion of the loan money-but didn't receive a check until July 14.

"There always seems to be something that's going not quite right." Sherrie Black said.

She said she wouldn't want to see an income ceiling put on the program because it would keep some families who can't get bank financing from being able to fix up their homes. On the other hand she added she thinks it is "reasonable" that those with higher incomes should be charged higher rates of interest.

John B. Ritch, a professional staff member of the Senate Foreign Relations Committee who has had tremendous problems with the District housing department in getting his projects completed-"torture", Ritch said-was approved for a low-interest loan of $110,000 to fix up 1305 P St. NW and $291,000 for 4 Logan Cir.

Ritch's P Street house will have four apartments and the Logan Circle house which has skylights in some of the rooms and New Orleans grill work outside has nine apartments squeezed into it. Ritch said he plans to rent the apartments to lower income families who qualify for a HUD rental subsidy program.

Builder Thomas P. Turchan Jr., after a two-year wait, is getting $96,000 through two rehabilitation loan programs that each charge 3 percent interest.Two apartments in Turchan's house in the 1300 block of Rhode Island Avenue NW will be rented to lower income people he said.

The federal loan program. Turchan contended "is bringing people into the area with money who will shop downtown and pay taxes. We are definitely doing something to help the city." CAPTION: Picture 1, President Carter, watched by relatives in Georgia tries out an electronic game.; Picture 2, Sherrie and Bill Black stand in their town house which will be worth more than $275,000 after renovation. By Gerald Martineau-The Washington Post; Picture 3, The Maffin apartment house is at left Photo by Larry Morris-The Washington Post; Picture 4, J. B. Ritch got a $291,000 renovation loan for the house. Photo by Larry Morris-The Washington Post; Picture 5, Sherrie and Bill Black's town house is at right. By Gerald Martineau-The Washington Post