A dispute about how to review lending practices in the city has developed between the D.C. Neighborhood Reinvestment Commission and the Metropolitan Washington Savings and Loan League.

The commission wants to see a strong local housing loan review committee with comprehensive powers and representatives from the neighborhoods, banks, and savings and loan associations. The league has proposed a home mortgage loan review committee board with no enforcement powers and whose members are appointed by the league.

The Neighborhood Reinvestment Commission was established by the D.C. City Council to study lending practices in the city, recommend policies to improve reinvestment in the city, and act as a catalyst in bringing the local government, private lenders, and the communities together. It is composed of the communities together. It is composed of representatives from each of those three bodies.

On Nov. 30, 17 savings and loan associations announced plans to establish a home mortgage loan review committee, an appeals board consisting of four members representing the public, and four members plus a nonvoting chairman from the savings and loan industry - all of the nine appointed by the savings and loans associations. The committee, to be established by the beginning of next month, would have no enforcement powers, but could recommend reconsideration of applications or modification of loan terms.

One of the purposes of the appeals committee is to assure city residents that they can have a "second chance," said T. William Blumenauer Jr., the president of the Columbia Federal Savings and Loan Association and the loan review committee chairman.

But several Neighborhood Reinvestment Commission members and community leaders sharply critized the league committee proposal in a meeting last week.

The commission voted, 7 to 1, to advocate the establishment of a different and much stronger, review committee. Its guidelines would include allowing the mayor and city council to select half of the public members, and the inclusion of banks as well as savings and loan associations. The appeals board also would review not only mortgage loans but also rehabilitation and refinancing loans, would review automatically all rejected loans, and would monitor the lending patterns of local financial institutions. The commission proposal also includes granting enforcement powers to this committee.

James D. Vitarello, executive director of the reinvestment commission, said the staff recommendations grew out of discussions with loan review committees in 10 cities and from recommendations from D.C. communities.

"It's an exclusive corporation controlled by the saving and loans," Vitarello said. "I personally believe savings and loans acted in a gross breach of a faith with us."

Dr. Jean Patterson, a housing coordinator for the United Planning Organization (UPO), told the commission that she will recommend to the UPO that it oppose the savings and loan review board because the lending institutions doesn't consult the reinvestment commission, community organizations or public interest agencies. Patterson said she also will recommend to the UPO's housing advisers that a "major letter-writing campaign" be mounted against the savings and loan appeals board.

Neighborhood Reinvestment Commision member J. Martin Bonesteel, who represents the savings and loan league on the commision, voted against the establishment of a different loan review committee at last week's meeting. He said that the savings and loan league is determined to make its own loan review committee work. He said he didn't like the approach of "trying to destroy something without giving it a chance."

Bonesteel said that the league may make revisions in its loan review committee someday. But for now, he said, "We want to get the show on the road." Bonesteel is vice president of Perpectual Federal Savings and Loan Association.

Urban restoration and reinvestment in the cities have recently became issues addressed by many national and local officials and organizations.

Last month, the Carter administration proposed regulations to reduce redlining, the practice of denying housing loans in aging and often predominantly black city neighborhoods. The proposals included a recommendations from the Federal Home Loan Bank Board that would prohibit lending institutions from denying mortgages simply because of the age of the house or the condition of a neighborhood.

Locally, in addition to its loan review committee proposals, the Neighborhood Reinvestment Commission is also working on goals for a comprehensive housing counseling plan, including a rehabilitation loan program and a program which will help rehabilitate multifamily units. Other cities and private organizations are also grappling with the problems of detoriorated neighborhoods.