UPDATE 1-UK bank B&B agrees new home loans deal with GMAC

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LONDON, Sept 23 (Reuters) - Troubled UK lender Bradford & Bingley BB.L said it has renegotiated a key deal with finance firm GMAC-RFC to take on around 1 billion pounds ($1.9 billion) less in homes loans and end their mortgage agreement early.

Under the original terms, agreed in December 2006, Bradford & Bingley agreed to purchase at least 350 million pounds ($650 million) of UK mortgage assets each quarter, with 1.75 billion remaining to be purchased before the end of 2009.

Under the revised terms announced on Tuesday, Bradford & Bingley will acquire 500 million pounds of loans in the fourth quarter of this year, then between 225 million and 250 million in the first quarter of next year, after which the deal ends.

"GMAC-RFC will receive in lieu, the equivalent of the premium that would have been paid should the agreement have run the full term," Bradford & Bingley said in a statement.

Bradford & Bingley's mortgage book, more than half of which is made up of loans to landlords in the so-called buy-to-let sector, has been closely watched by investors looking for evidence of worsening arrears across the UK market, as property prices fall and consumers come under pressure from rising bills.

When announcing a first-half loss in August, Britain's biggest lender to landlords had said it was in talks with GMAC over the current contract, which Bradford & Bingley pinpointed as its problem area.

Shares in Bradford & Bingley had earlier closed 12.4 percent lower at 24.75 pence. (Reporting by Mike Elliott; editing by Simon Jessop)