Investment bank Lehman Brothers Holdings Thursday said it would stop U.S. wholesale mortgage lending because of a continued slump in credit and housing markets, a move that will cut 1,300 jobs and result in a $40 million charge.
With these cuts, Lehman will have eliminated 3,750 mortgage jobs globally since June 2007. That represents a big scaling down of a business model the investment bank was one of the first to adopt, namely making home loans itself with the sole purpose of packaging the mortgages into bonds for investors.
Lehman said it will suspend wholesale and correspondent lending at its Aurora Loan Services unit.
Aurora will continue to make home loans directly to borrowers and service mortgages. But the company makes relatively few direct loans and does not have retail mortgage locations.
As part of the job cuts, Aurora is closing operations centers in Lake Forest, California; Sunrise, Florida, and Florham Park, New Jersey. Lehman also said it will record a charge for severance, technology and facilities exit costs.