MINORITY LOAN PLAN LAUNCHED : MERRILL LYNCH TO TARGET SOUTHLAND COMMUNITIES.

Byline: Deborah Adamson Daily News Staff Writer

Merrill Lynch & Co. on Wednesday announced it is offering $77 million in loans and services to minority communities in the Southland.

In the first deal of its kind, the country's largest investment house teamed up with community and advocacy groups to launch a 10-year program to provide home and small-business loans and brokerage services to underserved areas of Los Angeles and Orange counties.

The program is expected to start by mid-1997.

The deal would give Merrill Lynch a foothold in the burgeoning ethnic market of Southern California, and improve a corporate profile that was tarnished when the firm was sued by Orange County for its role in the county's bankruptcy.

While the Wall Street firm vigorously denies allegations of past impropriety, its program is a historic first step for the brokerage industry.

``It's all business,'' said Paul Critchlow, Merrill Lynch senior vice president of marketing and communications. ``Minorities are going to comprise the majority of the population of California soon after the year 2000. If we're smart, we want to get the leg up on everyone else. We want to establish ourselves in the market before our competitors awaken to it.''

The program will offer:

Zero-down payment home loans at prevailing market interest rates.

Small-business loans at the prime rate, plus 1 percent.

An equity fund to invest in Southern California companies.

30 new financial consultants to handle targeted areas.

Studies have shown that delinquency rates are not higher in low-income neighborhoods, said Robert Gnaizda, policy director for the Greenlining Institute in San Francisco, an advocacy group that approached Merrill Lynch about starting the program. It represents a coalition of 25 community organizations.

Community groups said they initiated the contact because of concerns about the impact of Orange County's bankruptcy on low- to moderate-income families.

Talks began six months ago, with Merrill Lynch in the throes of billion-dollar lawsuits.

Community groups couldn't be happier to get the attention, even if the money committed so far pales in comparison to billions spent by major banks.

``I think this is the best agreement ever done'' because Merrill Lynch also agreed to the unusual step of forming an advisory council for the program, said Valencia Roner, community relations director of the West Angeles Church, the largest African-American church in Los Angeles.

While Merrill Lynch's financial commitment is comparatively modest - annual revenues top $21.5 billion and its legal fees in the Orange County bankruptcy lawsuits are estimated to be at least $40 million so far - community groups believe it's a symbolic step that other investment houses may follow.

Heretofore, banks have been the major players in neighborhood development programs, largely due to requirements of the federal Community Reinvestment Act. Before a bank can get approval to open a branch, regulators review its lending practices to make sure there is equal access to loans by all communities in its service area.

Dave Burgess, vice president of policy analysis at the California Bankers Association in San Francisco, believes that Merrill Lynch's program will supplement banks' current efforts.

``We welcome the competition,'' Burgess said.

BankAmerica Corp. spokesman Russ Yarrow, lauded Merrill Lynch's move as a pioneering venture. He told the Associated Press that the only other zero-down payment loans he knew of were in a few markets in the Southeast by NationsBank, the big Charlotte, N.C.-based bank.

BankAmerica in 1992 set a 10-year goal of making $12 billion in loans under the Community Reinvestment Act.

Wells Fargo & Co., BankAmerica's chief California rival, committed to $45 billion in CRA lending over 10 years as part of its recent acquisition of First Interstate Bancorp.

THE MERRILL LYNCH PITCH

Details of the program targeted at minority communities of Los Angeles and Orange counties by mid-1997.

Zero-down payment home loans to minority neighborhoods. Income requirements are still to be determined.

Small-business loans at prime rate plus 1 percent. Firms with annual revenues of $800,000 and up that are at least 4 years old with good credit may qualify. Average loan size is expected to be $150,000 to $200,000.

$5 million as seed money for an equity fund to invest in companies.

Investing $2.1 million in low-income housing projects in Los Angeles County and $1 million in Orange County.

Additional programs under consideration:

Mutual fund that invests in ``responsible'' corporations pledged to affirmative action.

Creating a secondary market for small-business loans of around $150,000 to ensure capital for underserved areas.

Toll-free information: (888) SOCALML.

SOURCE: Merrill Lynch, Associated Press

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Box: THE MERRILL LYNCH PITCH (See text)