FANNIE MAE WARNS LENDERS\Vowing fines, mortgage agency says foreclosure process must begin\sooner.

Byline: Deborah Adamson Daily News Staff Writer

The nation's largest source of home mortgage funds is putting pressure on its lenders to speed up the foreclosure process or face fines.

Under a November directive by the Federal National Mortgage Association in Washington, D.C., known as Fannie Mae, lenders have to initiate foreclosure proceedings 3-1/2 months after the first missed payment.

Once filed, homeowners have at least 111 days under state law to work out a settlement before the properties are taken back.

It used to take eight to 10 months before foreclosures were begun, Fannie Mae lenders said. Fannie Mae loses interest revenue in a lengthy foreclosure.

Lenders who do not comply will be fined varying amounts, depending on the size of the loan, interest rate and length of delay.

"They are tightening up their time frame and putting the burden on the loan servicer," said Mel Barror, president of Verdugo Trustee Service Corp. in Glendale, a subsidiary of Glendale Federal Bank that handles foreclosures.

But he's not complaining: Verdugo's business is up 30 percent since fall.

Bob Engelstad, Fannie Mae's senior vice president for mortgage standards, does not believe the policy will cause more homeowners to lose their properties in foreclosure sales.

The policy should temporarily boost foreclosure activity because of tighter deadlines, lenders said, although some people who could work out their finances if given more time would lose out.

In Los Angeles County, notices of default rose 24 percent to 4,134 filings in December 1995 compared with the previous December, according to Dataquick Information Systems Inc. in La Jolla. For all of 1995, filings increased 6.9 percent to 42,497 compared with 1994 due to a soft economy and sliding home prices.

Tom Jenkins, a foreclosure attorney in San Francisco, said it's about time Fannie Mae dealt promptly with delinquent loans.

"In the non-Fannie Mae world, it is not uncommon for lenders to start foreclosure proceedings 40 to 75 days after a missed payment," he said.

Home Savings of America and BankAmerica Corp. said the new policy would not affect their foreclosure guidelines, which are more stringent.

Engelstad said lenders are urged to work with borrowers who are serious about keeping the mortgage. Fannie Mae compensates lenders for resolutions.

"No lender wants a foreclosure; that is a given," said William M. Jacobs, the Woodland Hills-based president of the California Mortgage Bankers Association.

He said foreclosures cost lenders at least $5,000 to get the occupants out, manage the property, list it for sale and take other steps.

Glen Pickren, president of Barron Financial in Irvine, which lends to people who buy and develop foreclosed properties, said the policy should deter homeowners who continue to live in houses long after they stop making mortgage payments.