Aurora Loan Services’ parent company, Lehman Brothers, announced today that it will substantially reduce its resources and capacity in the U.S. residential mortgage origination space in light of the dislocation in the mortgage markets.

As a result, Lehman Brothers is suspending all Wholesale and Correspondent mortgage originations at Aurora.

Aurora will continue to originate loans through its direct lending channel, and will maintain its servicing business.

First National Bank of Arizona has become the latest casualty in the mortgage collapse that is gripping U.S. lenders. The privately held bank has shuttered its wholesale mortgage lending division, according to mortgage brokers who have spoken with the lender.

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Somewhere in the Hamptons a high-roller is cursing his cleaning lady and shaking his fists at the lawn guys. The American poor, who are usually tactful enough to remain invisible to the multi-millionaire class, suddenly leaped onto the scene and started smashing the global financial system. Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.

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Michael Strauss, the founder and chief executive of American Home Mortgage Investment (AHMIQ), has faced a swarm of problems in recent months. One of the biggest, fastest-growing mortgage lenders in the country, its shares had slipped from a high of $36.40 last December to $10.47 by late July as the housing crisis deepened.

On July 31, things got decidedly worse. After the Melville (N.Y.) company announced that it would delay its dividend amid growing cash woes, panicked investors fled, sending the shares tumbling $1.04 by the end of the day. Six days later, American Home Mortgage filed for bankruptcy in Delaware (see BusinessWeek.com, 7/30/07, "American Home’s Credit Crisis").

Now, could Strauss potentially face civil insider trading charges as well?

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