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Last Updated: Wednesday, 22 August 2007, 20:21 GMT 21:21 UK
US sub-prime firms make cutbacks
US houses
There has been a surge in job cuts across the housing sector
Two firms hit by the US sub-prime crisis, have said they will close parts of their business and cut jobs.

Accredited Home Lenders said it would shut almost all of its retail arm, slicing 1,600 from its payroll. It has also stopped taking loan applications.

Meanwhile Lehman Brothers said it was closing down a mortgage subsidiary.

Global markets have been hit by fears that sub-prime firms, which lend to low-income, high-risk clients, would not be able to recoup their money.

Lehman Brothers said 1,200 jobs would go in 23 locations with the closure of its BNC Mortgage firm, which would cost it about $52m in charges.

And Accredited Home Lenders said that after the cuts it would employ about 1,000 people, compared with 2,600 on 30 June and 4,200 at the start of the year.

The firm said that it would honour existing loans, and hoped to resume its lending when market conditions improved.

Accredited said that it was making the cutbacks because of "ongoing turmoil" in the sub-prime sector.

"These difficult decisions were made out of necessity in light of the continued and widely publicised turbulence in the mortgage and financial markets, but with a heavy heart," said chief executive James Konrath.

Wider crisis

Accredited and Lehmann Brothers are not the first firms to make such announcements with other lenders such as Countrywide also making redundancies.

Data released on Wednesday by consulting firm Challenger, Gray & Christmas said the housing industry had announced 87,962 job cuts so far this year - 75% more than recorded for all of 2006, with 41% linked to housing market troubles.

Nearly a quarter of the year's cuts had been announced in August alone, it said.

The US sub-prime mortgage sector offers higher-risk loans to people with a poor credit history.

As US interest rates have risen and the housing bubble has burst, a growing number of sub-prime borrowers have defaulted on their loans.

Because the lenders have often sold on the debt, this has led to extensive financial difficulties for a number of investment funds with heavy exposure to the sector - prompting fears of a wider financial crisis.

Many sub-prime loans were given to borrowers who did not provide paperwork proving their income.

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