Housing advocates are criticizing Fannie Mae's and Freddie Mac's practice of selling nonperforming loans to the highest bidders, typically well-capitalized investment firms and hedge funds.

A coalition of community and housing groups wants the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, to instead give preferential treatment to nonprofits and community development financial institutions. They contend that some private buyers do not have a mission of offering foreclosure prevention and homeowner assistance and are not committed to stabilizing communities.

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