"Given the continued dislocation in the mortgage markets, we have restructured our residential mortgage business to ensure we are appropriately positioned for the environment going forward," said Anthony Meola, chief operating officer of the U.S. residential business, in a statement.
Morgan Stanley said it will continue to service loans in the U.S. through its Saxon Mortgage Services units. It will also offer residential mortgages to brokerage clients through Morgan Stanley Credit Corp.
It couldn't immediately be determined how many people are employed in Morgan Stanley's residential mortgage business.
Banks and brokers have eliminated more than 25,000 jobs in the past six months as they racked up $150 billion of write-downs and credit losses tied to mortgage securities. Morgan Stanley last month announced it was cutting 1,000 jobs in operations, technology and other areas because of the market downturn.
In December, Morgan Stanley took a $9.4 billion write-down because of losses on mortgage-related securities -- and quickly raised billions from Chinese investors to rebuild its capital base. Zoe Cruz, the company's co-president who was considered to be an heir to Chief Executive John Mack, was forced out of her job.
Wall Street investment banks spent the past few years beefing up their residential mortgage businesses to take advantage of the once-booming market.
However, increasing defaults among subprime borrowers caused mortgage-backed securities to plummet since the summer.
This has caused job cuts among the big Wall Street firms scrambling to scale back their mortgage operations. Lehman Brothers Holdings Inc. and Credit Suisse Group have announced since late January they are eliminating about 1,600 jobs.