WASHINGTON Several state agencies recently began negotiating with the Department of Housing and Urban Development to buy some of the billions of dollars of multifamily loans that HUD is trying to get off its books, department officials said this week.

In a related development, HUD is targeting the second quarter of next year for its first auction of nonperforming loans to private investors. In that auction, the department plans to sell $1 billion of mortgages covering multifamily projects in the Southeast. according to officials from the Hamilton Securities Group Inc., HUD's financial adviser for the loan sales.

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