Aug. 22 (Bloomberg) -- Accredited Home Lenders Holding Co., the mortgage company reeling from the collapse of a planned sale to Lone Star Funds, will close more than half its operations and fire about 1,600 people.

The San Diego-based lender, in an effort to outlast the subprime crisis that has forced dozens of competitors out of business, plans to close its 60 retail branches and five support centers within two weeks, according to a statement today. It's also halting all U.S. loan applications from its network of third-party mortgage brokers.

Accredited's cuts, plus the loss today of 1,200 jobs at Lehman Brothers Holdings Inc. and 600 jobs at HSBC Plc's U.S. operations, underscore the severity of the credit crunch in the mortgage industry. Investors won't buy anything but the safest mortgages and lenders refuse to take home loans as collateral, leaving companies from Countrywide Financial Corp. to Thornburg Mortgage Inc. starved for short-term financing.

``These difficult decisions were made out of necessity in light of the continued and widely publicized turbulence in the mortgage and financial markets,'' Accredited Chief Executive Officer James Konrath said in the statement.

Accredited fell 45 cents, or 6.9 percent, to $6.10 in 4 p.m. composite trading on the New York Stock Exchange. The shares are down 78 percent this year.

Down From 4,200

The restructuring will shrink Accredited's workforce to 1,000 from 2,600. The company employed 4,200 as recently as December. Employment at Accredited's headquarters will decline to 220 from 400. The wholesale unit that deals with brokers will shrink to five divisions from 10 and retain only about 40 percent of its staff of 830, according to the statement.

The decision earlier this month by Dallas-based Lone Star to abandon its takeover left Accredited scrambling for financing just as investors began shutting mortgage lenders out of the commercial-paper market they relied on for short-term debt. Accredited is suing Lone Star to keep the deal on track.

``Their hope is that the market recovers soon or they get some value out of the lawsuit, which buys them more time or gives them more capital,'' said KBW Inc. analyst Bose George, who has a ``market perform'' rating on the stock. ``There's nowhere to sell it and nowhere to put those loans. As a stand-alone entity it's going to be challenging for this company.''

Mortgages Sold

Accredited yesterday agreed to sell $1 billion of mortgages to an unnamed investor to prevent creditors from demanding more collateral. The cash raised in that sale and today's restructuring ``will enable the company to maintain its downsized operations until market conditions improve and the company can resume loan origination operations,'' Accredited said in the statement.

Today's reductions won't affect Accredited's Canadian operations or a division that services $8.4 billion of existing mortgages, the company said. Accredited said it will honor existing loan commitments.

London-based HSBC, Europe's biggest bank by assets, said that it will eliminate 600 jobs and close an Indiana office in a retreat from lending to subprime borrowers, or those at the greatest risk of default. Lehman, the biggest underwriter of U.S. bonds backed by mortgages, today became the first firm on Wall Street to close its subprime-lending unit. The 1,200 jobs cut equal about 4.2 percent of Lehman's workforce of more than 28,000.

Capital One Financial Corp., based in McLean, Virginia, eliminated 1,900 jobs on Aug. 20 in closing its GreenPoint Mortgage unit because it can't make money anymore lending to homeowners and then selling those mortgages to investors.

Accredited also said its Inzura settlement and insurance- services division will be ``substantially reduced.''

Last Updated: August 22, 2007 16:23 EDT