The head of the Federal Housing Administration enied here this week that any "tilting" of FHA home mortgage insurance would be done to aid cities at the expense of suburbs.

"That's not the way to aid or save our cities because it would deny freedom of choice of people to decide where they want to live," said assistant Secretary of Housing and Urban Development Lawrence B. Simons, who acts as FHA commissioner and handles mortgage credit.

He also denied that widespread use of FHA mortgage insurance has been to blame for an exodus from cities surrounding suburbs. "Nothing could be farther from the truth," he told hundreds attending the general session of the 64th annual convention of the Mortgage Bankers Association of America.

Rather, Simons emphasized that government programs can aid "the present desire and movement of people back to the cities" without taking away their freedom of choice. He said later that his response was to recently published stories that the FHA might better aid rehabilitation and residential rebuilding in the cities by emphasizing loan activities there and not in suburban areas.

Simons, a former Long Island builder, denied that the ills of the cities resulted from an exodus spurred by the strong use of FHA home loans to buy suburban dwellings in the 1950s and 1960s. "Large families wanted more space in their houses and more open space around them for their children," he said.

Simons told the mortgage bankers he rejects the notion that "FHA is somehow inherently incapable of administering both subsidized and unsubsidized programs under the same roof".

While admitting to FHA's problems in keeping pace with mortgage processing, Simons won applause in when he said the goal was to achieve five-day processing of applications and to computerize some aspects of the approval process.

Simon cautioned against the danger of measuring our system against "criteria which have nothing to do with the true purpose of housing programs, that is need for decent affordable shelter by 15 million housing-deprived people coupled with the need to preserve the social, physical and economic environment within which we find that shelter."