The Department of Housing and Urban Development has terminated its contract with the company charged with managing and selling 7,000 HUD-foreclosed properties in the Washington area.

HUD officials said the company, Atlanta-based InTown Management Group, failed to effectively market, maintain and sell the 25,000 properties under its jurisdiction.

The action, announced yesterday, came just days before InTown filed for Chapter 11 bankruptcy protection. InTown also had management and marketing contracts in 22 states, for roughly half of HUD's properties nationwide.

InTown officials could not be reached for comment, but a message posted on the firm's Web site said it made the bankruptcy filing "to protect its interest in its management and marketing contracts."

In March HUD stopped selling its own foreclosures and awarded contracts to InTown and six other companies to market them.

"InTown started falling behind from day one," said Federal Housing Administration commissioner William Apgar. The FHA, which is part of HUD, insures home mortgages. In the past month, a HUD statement said, contractors for the other half of HUD's properties sold more than twice the number of houses InTown has sold since the contracts began.

"What's most shocking is that even when they were in business, [InTown] never got around to listing half of their properties," Apgar said.

HUD officials said they would not accept bids on InTown properties until Wednesday. Apgar said he doubted the short delay would have much effect on local agents selling foreclosures.

But Roy Kelley, an associate broker with Re/Max Realty Group in Maryland, said the suspension means he and his company will lose money. "They're going off the market with the largest inventory we've had in recent memory," said Kelley. "That's potentially thousands of dollars for those of us who sell these properties."

HUD began its Management and Marketing program--M&M for short--as a way of outsourcing the maintenance and sale of foreclosed properties. HUD said it expects to earn about $5 billion this year from foreclosure sales.