Lehman Brothers Holdings, the investment bank brought down by the U.S. mortgage crash after 158 years, is set to return to funding home loans through its Aurora Loan Services unit, people familiar with the matter said.

Aurora, which helped make Lehman the top underwriter of mortgage bonds during the housing boom, has started hiring staff for the effort, they said.

The expansion comes even as New York-based Lehman is shrinking through asset sales, 13 months after filing for the biggest bankruptcy in history and selling its North American investment-banking unit to Barclays.

While Aurora will be forced to focus on the government-backed mortgages now accounting for 90 percent of new home loans, rather than the riskier debt it specialized in as recently as two years ago, reduced competition has made that market more profitable.

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