Home Savings of America's "outstanding" Community Reinvestment Act rating is being challenged by prominent advocacy groups in hearings before the Office of Thrift Supervision this week in California.

The protests, common in bank mergers but rare in the thrift industry, concern Home Savings' application to acquire 61 California branches that Wells Fargo & Co. is divesting from its April 1 acquisition of First Interstate Bancorp.

Technically, thrift regulators could deny the acquisition on Community Reinvestment Act grounds, but experts said such an outcome is unlikely.

On the surface, it would appear that advocates of lending to the poor would have little to object to in Irwindale, Calif.-based Home Savings, the country's biggest thrift, with $50.5 billion in assets.

Home Savings, owned by H.F. Ahmanson & Co., has been rated "outstanding" in four CRA examinations in the past five years, most recently in September. But some groups, including the San Francisco-based California Reinvestment Committee, take exception to Home Savings' February shuttering of a community development division that made construction loans for government-subsidized apartments and was said to be a leader in its field.

The Reinvestment Committee and other allied groups want Home Savings to reverse its decision and reopen the operation, something Home Savings has steadfastly refused to do.

Home Savings officials, for their part, say the thrift is one of California's biggest lenders to low-income neighborhoods. They also say the community development division constituted an insubstantial 4% of its lending to low-income areas, and that they should not be compelled to remain in businesses they wish to exit..

At Tuesday's hearing, representatives from both California Reinvestment and Home Savings had an hour each to defend their positions, with rebuttals of 20 minutes.

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