Barclays Bank, based in London's Canary Wharf (pictured above), agreed to sell HomEq Servicing, its US mortgage servicing business, to Ocwen Loan Servicing, a subsidiary of Ocwen Financial Corp. (OCN) for $1.3bn. The deal joins the top two converters of mortgage modifications, from temporary to permanent, under the Home Affordable Modification Program (HAMP), into one firm. The deal is still subject to an adjustment mechanism based on the unpaid principal balance of the servicing portfolio and the value of other assets at the completion of the transaction. As part of the deal, Barclays agreed to provide Ocwen with roughly $1bn in secured financing and would assist with raising additional third party financing. The sale is expected to be finalized in Q310. HomEq services roughly $28bn in unpaid principal balances as of March 31, 2010. In the deal, Ocwen gets the mortgage servicing rights and the servicing platform of HomEq, which is based in both Sacramento and Raleigh. "We are delighted to have reached agreement today with Barclays on definitive transaction documents to acquire its HomEq mortgage servicing business. The acquisition, once closed, will be an important step in the execution of Ocwen’s overall strategic planning to grow our servicing platform and expand revenues," said Paul Koches, executive vice president at Ocwen. Once the deal is finalized, Barclays said it would have a "small positive impact" to its tier one capital ratio, but it is not expected to have an impact on Barclays earnings per share. "Barclays Capital is committed to providing first-class products and capabilities to our clients worldwide. We look forward to continuing to serve our issuer and investor clients from our position as a leading underwriter and market maker of securitised products," said Tom Hamilton, head of securitized products trading at Barclays. Ocwen and HomEq held the top-two conversion rates in HAMP, according to an April report from the Treasury Department. Both converted 83% of their total trial modifications into permanent status. Ocwen holds more than 27,000 HAMP-eligible loans in its servicing portfolio, and has offered more than 23,000 trial period-plans. Of those, 19,000 trials have started with 12,000 modifications in permanent status. HomEq holds 16,000 HAMP-eligible loans and has extended 5,500 trial offers. The servicer has converted more than 2,200 trials into permanent status. Ocwen conducted a deal with Saxon Mortgage Services, the servicing arm of Morgan Stanley (MS), in April 2010. In that deal, Saxon transferred the mortgage servicing rights of approximately 38,000 predominately subprime loans, with an aggregate unpaid principal balance of about $6.9bn, over to Ocwen. Write to Jon Prior. The author holds no relevant investments.