WASHINGTON - In a highly unusual move, the Office of Thrift Supervision held a hearing last week to consider - behind closed doors - a challenge community groups have lodged against a Seattle-based mutual savings bank.

Two groups have charged Washington Mutual Savings Bank in Seattle with violating the Community Reinvestment Act. The activists said the OTS should not approve the $18.5 billion-asset thrift's pending acquisition of Salt Lake City's Olympus Bank.

Although the OTS gave Washington Mutual an "outstanding" CRA rating in 1993, the agency said the protesters raised charges that warranted further investigation. So the agency deemed the protest "substantial," a legal finding that allowed it to hold the hearing Feb. 13 in San Francisco. The OTS annually deems fewer than a half-dozen complaints "substantial."

Crossroads Urban Center of Salt Lake City and the Association of Community Organizations for Reform Now, or Acorn, in Seattle said that Washington Mutual, despite being the largest residential mortgage lender in Seattle, ranks only 48th in lending to Hispanics.

Also, the community groups said the mutual savings bank receives far too few loan applications from black and Hispanic residents, and operates only one branch in the city's predominately minority Central District.

Washington Mutual spokesman Bill Ehrlich declined to respond to the community groups' charges. "We don't wish to engage in a point/counterpoint argument," he said.

But, he did say that the thrift is dedicated to the community.

"Washington Mutual is committed to increasing the amount of affordable housing in our communities," Mr. Ehrlich said. "This is just a matter of some factual inaccuracies and some glaring omissions that have been put forward."

The OTS hearing itself caused some controversy. The community groups wanted the agency to hold the hearing on a Saturday, preferably Feb. 25.

But, OTS officials went ahead with the Feb. 13 date. That caused Acorn officials to boycott the proceeding because, they said, their members could not attend during working hours.

"It is a mockery of the whole process of community input when the federal regulator scheduled hearings such that a majority of the people who would be adversely affected by this merger are unable to attend," Acorn official Carmen-Rosa Torres said in a prepared statement.

But Tim Funk, executive director of Crossroads, did participate by phone. He said he wanted to make sure OTS and bank officials understood his group's concerns.

"We were flattered that they considered our protest substantial," Mr. Funk said. "But, we figured that if they considered it that substantial, they would want to facilitate our participation as much as possible."

OTS spokesman William E. Fulwider said agency officials in San Francisco will send a report with a recommended ruling to OTS officials in Washington, who should issue a decision within the next couple of months.

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