D.C. financial institutions need interstate branching, D.C. Del. Walter E. Fauntroy told the annual meeting of the Metropolitan Washington Savings and Loan League today.

"Unless they can expand outward, I don't see how small institutions can survive," Fauntroy said.

"For our institutions to be so seriously confined that they cannot compete for money where they are required by law to lend" doesn't make any sense, Fauntroy told the group, which loudly applauded his endorsement of interstate branching within the metropolitan area.

Fauntroy opened the 72nd annual meeting of the savings and loan league by talking about expanded powers available now to the industry and called for interstate branching to allow thrifts to compete more effectively for a share of savings.

Fauntroy's remarks were sort of a rallying cry compared to those of other speakers who surveyed the gloom in front of the savings and loan business and the economy and talked about a future that may include a radically changed industry.

"Our region is a single, unified market," Fauntroy told the group. "Our resources should not be controlled by institutions some 1000 miles away who view this area as an outpost." D.C. institutions should have the same rights to seek business in the suburbs as institutions based in Richmond and Baltimore, he said.

Interstate branching by banks and saving and loans generally is prohibited, but a federal commission is studying these prohibitions to determine whether they should be changed.

Other speakers predicted a vastly changed industry, with savings and loan institutions, rewriting lending rules to make mortgages affordable, using devices such as longer mortgages, accelerated payment schedules, or mortgages that are a higher percentage of the buyer's income.

"The thrift business will never be the same again," Maurice Mann, vice chairman of Warburg Paribas Becker Inc., told the group. "Competitive pressures are becoming more intense and more players . . . participants . . . and alternatives."

Mann predicted "increasing concentration of size" in savings and loans.