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Lehman Bros. to cut 1,300 mortgage jobs

The securities firm will close 3 offices of its Aurora unit, including one in Lake Forest.

January 18, 2008|From Bloomberg News

Lehman Bros. Holdings Inc. said Thursday it would eliminate 1,300 mortgage jobs in its fourth round of cuts resulting from the collapse of the mortgage market.

The company said its Aurora Loan Services unit would close three offices, including an Orange County office in Lake Forest. The other offices to be closed are in Florida and New Jersey. The company gave no breakdown of the job losses.

Aurora, which makes nontraditional mortgages known as alt-A loans to customers with higher-than-sub-prime credit ratings, also will stop funding loans made through outside brokers, Lehman said.

Lehman, the fourth-largest U.S. securities firm, cut 2,450 jobs last year by closing its sub-prime mortgage unit and shrinking Aurora.

"It's a little disappointing that they have to keep announcing new cuts," said Andrew Corn, head of Clear Asset Management, which owns Lehman shares. "It shows the mortgage market will get much worse before it gets better."

Lehman said it would take a $40-million charge to reflect severance expenses and the cost of exiting facilities.

Until last year, Lehman packaged the mortgages it made into bonds, which it sold to investors. But Wall Street's home-loan securitization business came to a halt last summer as defaults surged on sub-prime mortgages.

"It was necessary for us to structure our mortgage origination businesses in the U.S. to reflect the change in industry dynamics," Ted Janulis, Lehman's global head of mortgages, said in a statement.

Lehman shares slid $3.40, or 5.9%, to $54.66 on Thursday as an index of brokerage stocks fell 5.5%.

U.S. homeowner defaults have reached a 20-year high, pushing housing prices lower and forcing securities firms to write down the value of their mortgage-related assets by more than $121 billion. Wall Street banks have fired nearly 19,000 people since the sub-prime crisis began.

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