Lehman Brothers Holdings to close subsidiary BNC Mortgage

PM Investment bank Lehman Brothers Holdings Inc. (LEH) said Wednesday that it is closing its BNC Mortgage LLC subsidiary as a result of the turmoil in the U.S. subprime mortgage market.

BNC Mortgage LLC issues home loans to people who cannot document their income or have shaky credit histories. BNC Mortgage was a publicly traded company till 2000 when Lehman helped finance the buyout of BNC by its management for about $47 million. Lehman took an ownership stake and by 2004 bought out management's stake. Last year BNC Mortgage was the 40th-largest U.S. mortgage lender with $13.7 billion in volume, according to U.S. Banker.

The closure will affect about 1200 employees in 23 cities and cost the company $25 million in severance, real estate and technology costs, New York-based Lehman said. The company will also record a $27 million accounting charge for writing down goodwill.

BNC Mortgage said in its Web site that it will no longer accept new loan submissions and will be returning any loan files that have not already been approved.

Lehman, however, said that it will continue to issue home loans in the U.S. through its Aurora Loan Services LLC subsidiary.