Global financial services firm Morgan Stanley today announced a restructuring of its residential mortgage business, and 600 job cuts as a result.

The firm says that the restructuring is required to reflect current market conditions and to position the business for long-term growth. “The plan reduces origination capacity to a level appropriate for the existing market and integrates its global mortgage businesses under a single platform,” it notes.

This restructuring will result in a reduction of approximately 500 employees in the United States and approximately 100 employees in Europe, including 90 from Morgan Stanley’s UK mortgage subsidiary, Advantage.

The firm presently operates three stand-alone mortgage businesses in the U.S. — Saxon Capital, a servicer, special servicer and wholesale originator of subprime loans; Morgan Stanley Credit Corp, a retail originator of prime loans; and Morgan Stanley Mortgage Capital Holdings, an aggregator of loans purchased from correspondent lenders.

The consolidated platform will be a fully integrated mortgage company comprised of four centrally managed business channels: servicing, conduit, wholesale and retail. It will originate, purchase and service a broad spectrum of products through each business channel. The new U.S. residential platform will be headquartered in Irving, Texas and will retain the firm’s existing regional operations centers, but several offices will be closed as part of the restructuring with operations transferred to Texas.

“Morgan Stanley remains committed to building the leading vertically-integrated mortgage business and growing our Saxon Capital servicing operations despite the cyclical downturn in the mortgage markets. The consolidation of our mortgage businesses will result in increased efficiencies and superior service for our clients. It will also best position the firm for growth when opportunities present themselves in the future,” said Tony Tufariello, managing director and global head of securitized products.

Bruce Witherell, managing director and global co-head of the residential mortgage business at Morgan Stanley, added, “The industry has experienced a fundamental paradigm shift that will require banks to rethink product offerings and capital structures, and to provide greater transparency to investors in securities backed by pools of mortgages. This platform – combined with our world-class capital markets franchise – ensures that we are well positioned for this environment.”