Updated from 2:24 p.m. EST

Lehman Brothers ( LEH) on Thursday said it would an additional 1,300 layoffs in its residential mortgage lending business.

In light of further dislocation in the mortgage markets, Lehman has suspended all wholesale and correspondent lending activities at Aurora Loan Services, its Alt-A lender based in Littleton, Colo. Aurora will continue to originate loans directly to customers and maintain its servicing business, Lehman said.

Approximately 1,300 jobs will be eliminated, as Lehman closes three operational centers in California, Florida, and New Jersey, while Aurora's Colorado operations will be consolidated into the Littleton office, the firm said.

Lehman plans to take a $40 million charge after taxes for severance, technology and facilities expenses.

"While it was necessary for us to structure our mortgage origination businesses in the U.S. to reflect the change in industry dynamics, we deeply regret the impact this action has on our people," said Ted Janulis, global head of Lehman's Mortgage Capital arm. "We will continue to make technology and infrastructure investments in this space, as we reposition the business to reflect the changing industry."

Lehman has been steadily picking at its residential mortgage lending business since June, as the mortgage industry deterioration intensified. The move brings Lehman's total workforce reduction in mortgage origination to 3,750 positions.

In August, the New York investment bank cut 1,200 positions by closing the origination arm of BNC Mortgage, its subprime lender, which had been combined with Aurora earlier in the summer.

Lehman also announced that its residential mortgage origination and servicing businesses in the U.S., Japan and Europe, including Aurora Loan Services, Libertus and ELQ Hypotheken, will operate under the name Lehman Mortgage Capital.

The news comes as mortgage-lending giant Countrywide Financial ( CFC), hit hard as a result of the poor environment for lenders, agreed last week to sell itself to Bank of America ( BAC) for $4 billion.

Lehman's stock closed down 5.9% to $54.66, amid a marketwide selloff.

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