London's Barclays ( BCS) is paying just under $500 million for Wachovia's ( WB) mortgage servicing business.

The transaction, valued at $469 million, will enable Barclays to strengthen its U.S.-based mortgage securitization business.

Mortgage servicing is a business in which a bank earns fees collecting interest payments and handling other duties on home loans.

It appears Wachovia is picking the right time to sell its mortgage servicing business, now that the Federal Reserve is expected to slow the pace of future interest rate hikes.

Mortgage servicing tends to perform best when interest rates are rising, as they have been for the past year. Higher rates extend the life of the loan portfolio. By contrast, low interest rates prompt homeowners either to refinance their mortgages or pay them off early, and that decreases the portfolios value.

In a period of declining interest rates, mortgage servicers often are forced to take big charges against earnings to account for the reduced value of their loan portfolios.

If you liked this article you might like

SEC Charges Ex-CIBC Broker

SEC Charges Ex-CIBC Broker

Durus Manager Gets Hard Time

Durus Manager Gets Hard Time

Shift for SAC's Cohen

Shift for SAC's Cohen

New Frontier Holder Selling

New Frontier Holder Selling

PIPE Deal Shines Up Sun

PIPE Deal Shines Up Sun