US investment bank Lehman Brothers announced today that it will substantially reduce its resources and capacity in the US residential mortgage origination space in light of the dislocation in the mortgage markets. As a result, the company will cut 1,300 jobs in its mortgage arm due.

Lehman will close three operational centers in California, Florida, and New Jersey, while Aurora's Colorado operations will be consolidated into the Littleton office.

The firm cut 2,500 jobs last year after defaults on subprime loans to borrowers with poor credit rippled through the financial industry creating a credit crunch and losses in mortgage-backed securities.

“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 Mortgage Capital for Lehman Brothers. “We will continue to make technology and infrastructure investments in this space, as we reposition the business to reflect the changing industry.”

The latest rounds of cuts would save 40 million dollars, the company said. The fourth-largest US investment bank has weathered the crisis better than many competitors, marking record earnings in 2007, while other firms saw losses.