As Community Reinvestment Act enforcement gets tougher, more banks are turning to software vendor Financial Modeling Concepts - even banks that have outstanding ratings.

The company has just added Mellon Bank and Bank of America to its roster of 25 bank customers, which pay on average $40,000 for Financial Modeling's CRA software.

Many compliance software companies make a living from small banks just trying to stay out of trouble. But Financial Modeling Concepts attracts big bank customers who see compliance as a competitive tool. They know top-notch CRA ratings and fair lending scores are necessary to win regulatory approval for expansion plans.

"CRA and fair lending are the litmus tests for mergers and acquisitions," said Ned Brown, managing partner of Financial Modeling Concepts.

Mr. Brown said CRA ratings would get much tougher in the next 18 months. He predicts the number of banks with "needs to improve" and "substantial noncompliance" ratings will jump from about 200 to 1,000 by early 1996. Many of those banks, he said, would be large institutions.

That's how Financial Modeling Concepts expects to build its business. "My goal is to have 50 of the top 100 banks by the end of 1995:' Mr. Brown said.

Financial Modeling Concepts already sells to big banks that have had CRA or fair lending problems; Shawmut Bank, Fleet Financial Group, and Chevy Chase Savings Bank are all customers.

Financial Modeling Concepts also has started to individually analyze some customer loan files for discrimination.

"We've grown beyond being a software company," Mr. Brown said. "The technology, marketing, and regulatory relations aspects are all coming together."

Mellon Bank, which received three outstanding CRA ratings and one satisfactory, bought the software to stay ahead.

"Banks like Mellon look at the toughening of regulations and they want to be in position to grow," Mr. Brown said. "This is a preemptive move to protect their rating ."

Financial Modeling Concepts started selling its "Loantrax" software last year. Using data bases on 85 million households, representing 97% the United States, it analyzes public information about households, including age of residents, annual income, and what kinds of cars they drive.

That information can then be used to find and target potential low- to moderate-income borrowers for CRA lending.

New CRA exams are expected to focus more on actual lending results, making household-specific information more valuable to banks.

The software doubles as a marketing tool, helping bankers decide who to approach through direct mail or other tactics.

Bank of America is using Loantrax in opening a new branch in Houston. The product helps BofA assess loan opportunities in the area by quantifying potential borrowers and developing marketing lists.

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