WASHINGTON -- The Department of Housing and Urban Development on Sept. 23 will begin auctioning off nearly $12 billion of federally insured 40-year multifamily housing loans to private investors, a HUD official said yesterday.

Until last year, lenders holding the mortgages -- many of which were financed with tax-exempt bonds -- were expected to start exercising put options and turn the loans back to HUD. Legislation passed in 1990, however, allows HUD to sell the loans to the private sector, so that the department can keep the loans off its books.

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