Lehman to Make Further Mortgage Layoffs
WSJ - In a reflection of the worsening condition of the U.S. mortgage market, the investment bank Lehman Brothers Holdings Inc. is planning to lay off 850 people in its residential home-loan division, the firm announced today.
The move, which comes amid a near drought in the market for originating new home loans, is part of a broader restructuring of the firm’s mortgage business, which is trying to curb costs.
Lehman’s latest round of layoffs comes just weeks after 1,200 employees, or 4% of the firm’s workforce, were let go as part of the shutdown of BNC Mortgage LLC, the internal unit that originated so-called “subprime” mortgages, which cater to borrowers with weak credit. Lehman is one of Wall Street’s biggest players in the home-loan business, which has made it particularly vulnerable to the current downswing in loan origination.
In addition to the layoffs, a handful of different internal mortgage operations — including the U.S. origination unit Aurora Loan Services, as well as related businesses in Europe and Japan — will be combined into a new entity known as Lehman Mortgage Capital. Altogether, the restructuring will cost about $20 million after taxes.
Lehman, the largest underwriter of mortgage-backed securities, has now cut nearly 2,500 positions in its residential mortgage units since the beginning of the summer.
Outplacement firm Challenger, Gray & Christmas said Wednesday that, through August, there were 48,705 announced job cuts from mortgage and subprime lenders, 30,892 of which were last month alone. In all of 2006, there were 12,874 announced cuts, said Challenger.
Shares of Lehman were recently down 88 cents, or 1.6%, to $53.47.
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