The Department of Housing and Urban Development will sell a $1.7 billion portfolio of nonperforming Federal Housing Administration loans in September as part of a bulk sale program aimed at helping borrowers avoid foreclosure, the loan sale advisory firm DebtX said Thursday.

HUD created its Distressed Asset Stabilization Program in 2010 to safeguard the FHA's insurance fund while helping seriously delinquent borrowers avoid foreclosure. Under the program, seriously delinquent FHA loans are sold for less than what the borrower owes, which gives investors the flexibility to reduce or modify the loan's terms. Investors who buy the loans in a competitive bidding process have to wait six months before proceeding with a foreclosure.

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