Private equity firm Blackstone is in talks to buy a £6bn book of residential and buy-to-let loans from Bradford & Bingley, GMAC-RFC and Kensington Mortgages.
The UK Government plans to auction off the mortgage book later this year, according to Sky News.
OneSavings Bank, Och-Ziff and TPG are also expected to bid for the B&B book.
The Treasury had originally earmarked £3bn of loans to be sold this year but has recently upped its estimate.
Most of the £6bn portfolio will be B&B loans, but a small tranche will come from Government-owned GMAC and Kensington loans.
Morgan Stanley will oversee the sale and has contacted possible bidders.
Three months ago Blackstone and Prudential bought £11.8bn of Bradford & Bingley loans.
The Government took over B&B’s mortgage book in a part-nationalisation of the bank after the credit crisis.