To Stem Foreclosures, Federal Housing Agency to Sell Off Loans In a move intended to prevent foreclosure for thousands of homeowners and shed some seriously delinquent home loans, the Federal Housing Administration will sell off distressed mortgages in bulk, the housing secretary said Friday. The housing administration aims to sell 5,000 mortgages each quarter beginning in September. The agency is burdened by more than 700,000 seriously delinquent mortgages, most of which originated from 2007 through 2009. There are restrictions on how deeply those loans can be modified as long as they are backed by the agency. The housing secretary, Shaun Donovan, has supported debt reduction for certain homeowners who owe more than their homes are worth and helped negotiate the $25 billion national settlement with the nation's largest banks over foreclosure abuses, which includes homeowner debt relief. Administration-insured loans are technically eligible for debt reduction, but not many are expected to be reduced because banks are more likely to address loans not insured by the agency. Selling the loans could create a backdoor route to debt reduction. Investors who buy them would have greater leeway to reduce principal or offer rent-to-own plans and other means of making the mortgage affordable, Mr. Donovan said at the Clinton Global Initiative in Chicago. Homeowners whose loans are sold "might get a call to say, "Hey, we're willing to cut your payment dramatically, or cut the balance on your loan dramatically," " he said. There are going to be a set of options that might arrive on that doorstep as the best news that homeowner has ever heard. To be eligible for the program, loans must be more than six months delinquent and must have been through the administration's available foreclosure-prevention programs. The loan servicer must have begun the foreclosure process, and the borrower must not be in bankruptcy. Investors would have to halt foreclosure proceedings for at least six months and would have to agree not to sell half the properties for at least three years. For the program to work, the agency will need to sell the loans at deep discounts. The agency now receives only 36 cents on the dollar for a foreclosed home. So the agency may be able to offer a price attractive enough for investors without losing money. It has sold more than 2,000 distressed loans as part of a pilot version of the program announced on Friday, but a spokeswoman could not confirm how much the sales had yielded. Rick Sharga, the executive vice president of Carrington Mortgage Holdings, says investors typically pay 40 to 60 cents on the dollar for seriously delinquent loans, depending on the local market and matters like whether foreclosure required judicial proceedings. He applauded the housing agency's program and said investors like Carrington would be interested, but added that some of the limitations placed on the sales would hold down their value. For example, an investor might estimate that 80 out of 100 homes in a pool of mortgages would have to be sold within three years, but the deal would allow only 50 to be sold. "The greater selectivity the investor has in what's in the pool, the greater the likelihood they'll be able to live with what F.H.A. is offering," Mr. Sharga said. In Chicago, Mr. Donovan and Carol Galante, the acting commissioner of the housing agency, barely addressed the budgetary aspects of the program, instead emphasizing the potential to help homeowners - both people who are behind on their payments and those whose property values are threatened by neighborhood foreclosures. Mr. Donovan also mentioned the agency's efforts to encourage more refinancing at lower interest rates for borrowers who are current on their mortgage payments. On Monday, reduced fees go into effect that will save homeowners with agency-backed loans an average of $1,000 a year when they refinance.