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Report: Merrill to Close Subprime Unit

The bank, hard hit by the mortgage and credit meltdowns, already had scaled back its First Franklin unit.

Merrill Lynch

(MER)

is reportedly shuttering its troubled subprime mortgage lender, First Franklin, according to

CNBC

.

The closing of the San Jose, Calif.-based wholesale mortgage lender will affect roughly 400 employees,

CNBC

said.

Merrill paid $1.3 billion to acquire First Franklin from

National City

(NCC)

in late 2006, mere months before the subprime mortgage market imploded.

Merrill is the latest Wall Street firm to take an ax to its residential mortgage business as the housing sector spirals downward.

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,

Lehman Brothers

(LEH)

and

Bear Stearns

(BSC)

have also been slashing jobs related to mortgage originations.

A Merrill spokesman said in an email that the company does not comment on market rumors.

First Franklin, like other subprime lenders, had already downsized its operations as the mortgage crisis worsened last year. In September, it closed several loan processing centers.

"First Franklin has been successful over 26 years because of its ability to adapt to changing market conditions," the spokesman said at the time. "We have adjusted our staffing levels to be in line with current business requirements."

Shares of Merrill Lynch recently were falling 4% to $52.02 on Thursday.