Barclays Bank has agreed to sell HomEq Servicing, its U.S. mortgage servicing business, to Ocwen Loan Servicing, a subsidiary of Ocwen Financial Corp.
The sale is for a consideration of around $1.3 billion, payable in cash on completion. The consideration is subject to an adjustment mechanism based on the unpaid principal balance of the servicing portfolio and the value of certain other assets at completion of the transaction.
"After thorough review, we have determined that HomEq is no longer core to our strategy," Brandon Ashcraft, Barclays spokesperson, said. He added that as part of this transaction, Barclays has secured an agreement with Ocwen that will enable the bank to leverage the Ocwen platform to provide mortgage servicing to its clients when required.
As part of the deal, Barclays has agreed to provide Ocwen with about $1.0 billion in secured financing and may assist Ocwen in raising added third-party financing. The sale's completion is subject to customary conditions such as competition clearance and is expected to happen in the third quarter.
HomEq is the U.S. mortgage servicing business of Barclays Capital and services mortgages with an unpaid principal balance of around $28 billion as at March 31. The principal assets subject to the deal are the mortgage servicing rights and associated servicer advances, as well as the servicing platform based in Sacramento, California and Raleigh, North Carolina.
Subject to regulatory approval, the sale is expected to have a small positive impact on Barclays core tier one capital ratio, principally as a result of the release of capital deductions. The transaction is not expected to have a material impact on the bank's earnings per share.
"Barclays Capital is committed to providing first-class products and capabilities to our clients worldwide," said Tom Hamilton, securitized products trading head at Barclays Capital. "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."