Morgan Hill, Calif.-based ComUnity Lending, Inc. said today in a notice posted on the company’s Web site that it will be “moving to the sidelines while we wait for sanity to return to the market.” From the notice:

We will be retaining two production offices in California and a core group of dedicated staff at our Central Support office in Morgan Hill. Effective September 1, 2007, ComUnity Lending, Inc. will move all loans to these two offices and we will lock only through these two offices. We will be working with friendly competitors to find homes for our Retail offices and other production units.

The company suggested that it intends to “aggressively” re-enter the market after “a short period of rest and re-structuring,” and that it expects to close all outstanding loans at other offices by September 14.