Merrill Lynch announced that it is discontinuing mortgage origination at its First Franklin subsidiary in the Unites States and will explore the sale of Home Loan Services, a mortgage loan servicing unit for First Franklin.

The company said it made the decision to discontinue lending by First Franklin because of the deterioration of the subprime lending market. About 650 people will be affected by the discontinuation of mortgage origination at First Franklin and First Franklin’s NationPoint division. The firm estimates total charges, primarily severance and real estate costs related to this matter, for 2008 of approximately US$60 million, of which approximately half will be recorded in the first quarter.

Merrill Lynch will solicit bids for Home Loan Services in the coming weeks.

The actions do not affect mortgage origination through the firm’s Global Wealth Management Group, including prime mortgages originated through Merrill Lynch Credit Corporation. Merrill Lynch’s international mortgage businesses are not affected by these actions.

“Since July, we have reduced staffing at First Franklin by nearly 70%, but after evaluating a number of strategies, we believe it is appropriate to discontinue mortgage origination,” said David Sobotka, head of Fixed Income, Currencies & Commodities at Merrill Lynch.