The groups are protesting the HUD Distressed Asset Stabilization Program, which was created two years ago to auction delinquent loans to the highest bidders. In 2010, the government began selling delinquent mortgages that are at least 90 days past due to the highest bidder in an attempt to help the FHA rebuild cash reserves that were hit hard by loan defaults during the recession.

In the first 2 years, the FHA sold 2,000 loans in six auctions. In September 2012, when the loan pools were expanded under the new DASP program, it sold over 3,000 loans during the first auction.

The community groups claims these sales harm stabilization goals in neighborhoods, including affordable housng and homeownership.

“We’re seeing an unprecedented rise of the corporate landlord, and HUD’s DASP is just facilitating the process,” said Rachest Laforest, executive director of the Right To The City Alliance. She argues that HUD should instead use a system to favor nonprofit bidders whose mission is to invest in the community with greater requirements for winning bidders to preserve homeownership and offer affordable housing options to homeowners.

In a report released earlier this month, HUD said it sold $15.8 billion in nonperforming loans since 2010, which reduces losses to its insurance fund and saves homeowners from foreclosure. New reports claim the program helps the FHA avoid having to get more money from taxpayers, although it is questioned whether there are any efforts to protect neighborhoods that are hit hard by foreclosures.

About 97% of loans sold have gone to for-profit, private investors, such as private equity firms, hedge funds and mutual funds. Just 11% of the loans sold under DASP are considered “re-performing,” according to a report released by the Center for American Progress, while 22% were allowed to short sale or the property was surrendered for loan forgiveness. One-third were turned around and re-sold, while another one-third went into foreclosure.

“These are companies that put the financial gains of their shareholders first and community stabilization second — or I would say it’s not even necessarily a priority for them,” said Connie Razza, co-author of a report released by the Center for Popular Democracy and the Right To The City Alliance.

The group has sent a petition to Julian Castro, who took over HUD, which houses the FHA, asking that he stop selling loans under DASP until the program an be strengthened and refocused on improving neighborhoods.

During the housing crash, the share of FHA loans skyrocketed as homeowners could not get private loans, increasing from 2% of mortgages in 2006 to almost one-third by 2009. A wave of defaults put the FHA’s mortgage insurance fund into the red, and it took its first $1.7 billion taxpayer bailout in 2013. So far, almost 100,000 non-performing loans have been sold under DASP, giving the FHA a net of $8.8 billion.