McLean Savings & Loan Association has discarded its mortgage banking company after an investigation of the subsidiary's books revealed that its financial losses were more serious than the S&L had expected.

McLean Financial Corp., which has been involved in lawsuits for several years, was responsible for $6 million of the roughly $7.5 million lost by the savings and loan in the fiscal year ended March 31, the S&L recently said.

The association sold its 61 percent interest in McLean Financial in August, according to financial statements released last week. McLean Financial subsequently filed for protection under Chapter 11 of the bankruptcy code, which permits the company to continue operating while it works out a way to pay its debts.

It was not clear last week who became the principal shareholder of McLean Financial, but former McLean officials said they believed the new owner is James D. Lobley, the firm's new president. Lobley was unavailable for comment.

The bankruptcy filing was the latest chapter in the stormy history of McLean Financial. The firm gained publicity with the numerous television appearances of its former president, Frank M. Howard, and as a result of a bitter series of lawsuits with lenders who allege that McLean Financial broke commitments to buy their mortgages. The company has denied the charges.

In a letter last month to shareholders of McLean Savings & Loan, President John E. Harn said an initial review of McLean Financial's books last year showed that the company was "moderately profitable."

However, Harn wrote that a subsequent review and investigation resulted in more than $9.5 million in adjustments on McLean Financial's books. In particular, an in-depth investigation during the summer revealed "numerous significant inconsistencies" in the books, Harn wrote.

Harn stated that the association's management "feels that the $6 million loss for the fiscal year at McLean Financial Corp. could have been significantly reduced if accurate and timely financial data had been provided to the Board of Directors by McLean Financial Corp. management."

Mclean Financial's top two executives -- Howard and executive vice president Thomas J. Leonard -- resigned in August. On Friday, Leonard said he did not know why Harn "feels that way or the basis for that statement."

"We had some accounting problems ... but every effort was made on our part to give them accurate information," Leonard said. Harn was unavailable for comment last week.

Leonard attributed McLean Financial's problems to losses from troubled real estate loans in Texas, inflated overhead costs and the expenses of defending its numerous lawsuits.

According to Harn's letter, McLean Financial ran up $1.5 million in legal expenses for the fiscal year -- a source of constant concern for top executives at McLean Financial, Leonard said. The bulk of the legal work for McLean Financial was handled by the McLean law firm of Light and Harrison, whose partner John Harrison is a director at McLean Savings and Loan and was formerly chairman of McLean Financial Corp. Harrison's law firm is owed $388,923 by McLean Financial, making it the second-largest creditor, according to papers filed in U.S. bankruptcy court in Alexandria.

"We're not happy with the {legal} bill," Harrison said in an interview Friday. "We wish it was smaller. But given the climate of a litigious society, it is very difficult to operate ... without running up a monstrous legal bill." While McLean Financial settled a number of cases out of court, he said the firm did not lose any cases.

Harrison repeated Harn's contention that McLean Financial's management failed to provide timely information, and he said board members of both the S&L and the mortgage subsidiary were unaware of the subsidiary's accounting problems until recently. He said separate reports from McLean Financial's accountants and management showed that for the first nine months of 1987, McLean Financial "was making money."

It was not until the S&L's own internal auditors, in their routine review of the subsidiary's records last spring, discovered accounting problems with McLean Financial's books, he said.

"We had no indication that there was a problem until they went down there," Harrison said.

The biggest creditor reported by McLean Financial in its bankruptcy filing is McLean S&L, which is owed $4.5 million. The bankruptcy filing listed more than 300 other creditors. McLean Financial reported total assets of $51.4 million and total liabilities of $49.1 million.

The losses at McLean Financial were clearly the prime reason for the S&L's financial losses in the fiscal year, although the association also blamed loans that went sour in the oil patch. The association said it set aside $4.6 million in loan reserves to cover losses from delinquent mortgage loans and disposition of real estate owned because of foreclosure. The association reported that after-tax losses increased to $7.5 million, up from $822,790 during the year, while total assets dropped from $416.3 million to $367 million.

As of March 31, the association's net worth was $7.4 million, or well below the $15.1 million required by federal regulators.

When an institution does not meet regulatory capital requirements, regulators may impose various restrictions on its operations. However, management has applied for forbearance from this policy under federal Home Loan Bank Board rules, and the association said it believes this will be granted.

A bank board spokeswoman declined comment last week.

Harrison said the association's woes were a thing of the past with the divestiture of McLean Financial and the resolution of other difficulties. "You have a pretty substantial S&L, whose core operations have always been in pretty good shape," he said.