Laurie Kulikowski
Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks) is closing its subprime lender, BNC Mortgage.
The New York investment bank will cut 1,200 positions in 23 locations as a result of the closing of BNC Mortgage. It will take an after-tax charge of $25 million and a goodwill writedown of $27 million, it said. Lehman said that poor market conditions in the mortgage space of late have "necessitated a substantial reduction in its resources and capacity in the subprime space," according to a release. The company said earlier this summer that it was combining its two nonprime residential mortgage businesses -- Aurora Loan Services of Littleton, Colo., which specializes in Alt-A mortgages, and BNC Mortgage of Irvine, Calif. Lehman had begun laying off employees at BNC Mortgage in June. Lehman said it continues to originate mortgages through Aurora's platform. The closing of BNC Mortgage comes as the nonbank mortgage industry implodes. Dozens of lenders that cater to borrowers with less-than-stellar credit histories have closed up shop as a result of rising delinquencies and defaults in so-called subprime loans. Others closing up shop this week include Accredited Home's (LEND Quote - Cramer on LEND - Stock Picks) retail unit and Capital One's (COF Quote - Cramer on COF - Stock Picks) GreenPoint bank. Shares of Lehman fell 34 cents to $57.20.
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