FOR IMMEDIATE RELEASE                                          CR
MONDAY, AUGUST 22, 1994                                      (202) 616-2765
                                                         TDD (202) 514-1888

JUSTICE DEPARTMENT OBTAINS UNPRECEDENTED SETTLEMENT FROM D.C AREA
     BANK FOR ALLEGEDLY FAILING TO SERVICE PREDOMINANTLY BLACK AREAS 

     WASHINGTON, D.C. --  Broadening its approach to ending
lending discrimination, the Justice Department today settled an
unprecedented case against a Washington, D.C area bank for
refusing to make its services available in predominantly African
American neighborhoods.  The case, against Chevy Chase Federal
Savings Bank and its wholly owned subsidiary, B.F. Saul Mortgage
Company, is the first lending discrimination suit focussing
solely on a bank's refusal to market its services in minority
neighborhoods.
     "To shun an entire community because of its racial makeup,
is just as wrong as to reject an applicant because they are
African American," said Attorney General Janet Reno.  "Some
neighborhood banks may turn away blacks because of their race,
but other neighborhoods may not even have banks to which blacks
can turn."
     The Justice Department alleged that Chevy Chase violated the
federal Fair Housing Act and the Equal Credit Opportunity Act by
declaring black areas off-limits for mortgage lending, a practice
otherwise known as redlining.  The complaint, filed together with
a settlement in U.S. District Court in D.C., claimed that the
bank underwrote approximately 97% of its loans from 1976 through
1992, in predominantly white areas.
     "You can't be refused service, if there is no service being
offered," said Assistant Attorney General for Civil Rights Deval
L. Patrick.
     The Justice Department began investigating Chevy Chase in
June 1993, after The Washington Post ran a series entitled
"Separate and Unequal".  The series cited widespread disparities
in the number of mortgage loans made in white and black
neighborhoods. 
     To settle the Justice Department's claim for monetary
damages, today's agreement requires Chevy Chase to pay $11
million to the redlined areas through a special loan program and
the opening of bank branches and mortgage offices.  The bank will
pay at least $7 million by offering special home mortgage loans
to all residents of majority black areas in Washington, D.C. and
Prince George's County, Maryland, resulting in approximately $140
million in special financing for the communities.  The offering
will make home loan financing available at either 1% less than
the prevailing rate or 1/2% below the market rate combined with a
grant to be applied to the down payment requirement.
     Under the settlement, which is subject to court approval,
the bank has agreed to:
    open three mortgage offices in majority African American
     neighborhoods in D.C., and one bank branch in the Anacostia
     section of D.C.;

    evaluate other sites for bank branches in the redlined
     communities;

    take all reasonable steps to obtain a market share of
     mortgage loans in African American neighborhoods that is
     comparable to its market share in white neighborhoods;

    extensively advertise its services and target sales calls to
     real estate professionals active in African American areas;
     and

    continue efforts to recruit African Americans for loan-
     production positions and provide training to its loan staff
     in affirmative marketing programs.

     Chevy Chase, the largest savings and loan association in the
D.C. metropolitan area and one of the nation's largest thrifts,
operates 78 branches and 20 mortgage offices.  Prior to the
Justice Department's investigation, the bank had virtually all of
its branches and mortgage offices in majority white areas --
delineated by census tracts.  
     The bank opened no branches in any of D.C.'s majority black
census tracts, which account for 90% of all African Americans in
the city, nor had it opened branches in any of Prince George's
County's majority black census tracts, accounting for 75% of that
county's black population.  Prince George's County has the
nation's lowest disparity in income levels between black and
white residents, with nearly 40% of all black households earning
an income of over $50,000.
     In the complaint, the Justice Department also claimed that
the bank had a corporate policy of only soliciting financial
transactions in the most heavily white populated parts of D.C.;
failed to meet the needs of the entire community in violation of
the Community Reinvestment Act; employed few African Americans as
loan originators; and implemented a commission structure for loan
originators which disproportionately and adversely affected
residents of black neighborhoods.  
     From 1988 to 1992, the bank received less than 6 percent of
home mortgage loan applications from African American applicants. 
Additionally, the vast majority of residential construction and
commercial loans supported properties and business in white
residential areas.
     Since the defendants were notified of the Justice
Department's investigation, the lenders initiated an aggressive
effort to serve African American neighborhoods of the Washington,
D.C. metropolitan area.  They have opened three bank branches and
two B.F. Saul Mortgage Company offices in African American areas
of D.C. and Prince George's County.  The mortgage company has
also launched an aggressive campaign to market its home financing
products to real estate professionals serving D.C. area African
American neighborhoods.
     "Curtailing marketing practices and neglecting whole
segments of a neighborhood devastate not just the lives of
individual citizens but the well being of an entire community,"
said United States Attorney Eric Holder. 
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