MILAN/LONDON (Reuters) - Three consortia have submitted bids to buy 13 billion pounds ($20 billion) of former Northern Rock loans being sold by the British government, drawing in big names including JPMorgan (>> JPMorgan Chase & Co.) and Blackstone (>> Blackstone Group LP), several people familiar with the matter said.

The three bids for the loans, known as Granite, were submitted by a deadline on Oct. 9, the sources said on Monday.

This will be one of the biggest ever loan portfolios to be sold off, which is why these big companies are teaming up with others to share the cost and expertise.

Granite was set up by Northern Rock to do mortgage-backed deals and it held 13.22 billion pounds of mortgage loans at the end of January.

Two sources close to the bidding process said one offer was from a consortium including JPMorgan and U.S. alternative investment firm CarVal Investors. Another source said that Christofferson Robb & Co, a private money management firm, was also teaming up with them.

A second bid was from U.S. bank Citigroup (>> Citigroup Inc) and Deutsche Bank (>> Deutsche Bank AG) along with U.S. buyout firm Blackstone, U.S. hedge fund Och Ziff, and the special situations arm of private equity firm TPG Capital , two sources said.

The third bid was from U.S. bank Morgan Stanley (>> Morgan Stanley) and private equity firm Cerberus, another source familiar with the process said.

The assets are being sold by UK Asset Resolution (UKAR), Britain's so-called bad bank which is winding down the loans of Northern Rock, which collapsed in 2007 and was nationalised by the British government.

UKAR said it expects to choose a preferred bidder this year and complete the deal by the end of March.

It declined to comment on the identity of any bidders.

All the companies involved either declined to officially comment or could not immediately be reached for comment.

Other companies that showed an interest but did not bid included state-backed bank Royal Bank of Scotland (>> Royal Bank of Scotland Group plc).

Britain's government started the sale process in March. Reuters reported in June that several bidders including Blackstone had submitted indicative offers.

It is taking time to complete because the size of the portfolio requires extensive due diligence.

British finance minister George Osborne is keen to sell the government's banking assets to recoup taxpayers' money.

($1 = 0.6513 pounds)

(Writing and additional reporting by Steve Slater, additional reporting by Freya Berry and Matt Scuffham in London, editing by Sinead Cruise and Jane Merriman)

By Massimo Gaia and Pamela Barbaglia