Lehman to shut down its subprime unit

Lehman Brothers Holdings on Wednesday said it is shutting down subprime mortgage unit BNC Mortgage Corp., affecting the jobs of 1,200 employees in 23 cities and resulting in a $25 million charge.

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Separately, subprime lender Delta Financial Corp. said it has cut about 300 jobs, or 20 percent of its workforce, to address the expected decrease in loan originations resulting from the deterioration of credit markets.

The Woodbury, New York-based company also said it will take a related pre-tax charge of $2.0 million to $2.5 million in the current third quarter.

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Lehman Brothers, a U.S. investment bank with an extensive mortgage business, said credit market conditions prompted it to slash its subprime resources and capacity. Lehman will continue to originate mortgages in the United States through its Aurora Loan Services LLC platform.

The bank said it will record $25 million in after-tax charges for severance, real estate and technology costs and write down goodwill associated with the unit, or $27 million.