Hoping to stem the tide of the subprime mortgage fallout, the Pew Charitable Trusts announced this week that it will donate $1 million to help educate homeowners and curb abusive lending practices that have helped lead to the current crisis.

Over a two-year span, Pew will give the funds to the Center for Responsible Lending to help strengthen underwriting standards, including verifying a borrower’s income, and ensure that borrowers have the ability to repay the mortgage after scheduled increases in the loan’s interest rate.

“American families have plenty of financial pressures facing them today and now too many have also fallen victim to mortgage schemes that can leave them broke or homeless, or both,” said Tobi Walker, Pew officer in Health and Human Services Policy.

Overall, about one in five people who obtained subprime mortgages in the last two years will wind up in foreclosure, according to the Center for Responsible Lending, a nonprofit advocacy group.

More than a half-million borrowers have lost their homes in the subprime market, and industry experts project that another 2 million or so are likely to meet a similar fate as the subprime crisis spirals.

With Pew’s support, the Center for Responsible Lending will work to protect all subprime borrowers by urging other federal and state policy makers with jurisdiction and industry leaders to adopt basic standards.

Casualties continue to mount as the subprime crisis rakes the housing market.

Mortgage applications plummeted last week, according to the Mortgage Bankers Association. The drop is indicative of growing unrest in the housing market, as rising interest rates, stricter lending guidelines and the subprime bubble continue to affect prospective homeowners.

Applications to buy homes dropped 3 percent and mortgage application volume fell 3.4 percent the week ending June 15, according to the MBA’s Market Composite Index.

With subprime borrowers defaulting every day, lenders are tightening their belts and instituting stricter rules and regulations for borrowers. In turn, more applications are being denied.

Foreclosure starts also reached another record high last quarter, the MBA recently reported, another sign of the long reach of the subprime crisis. The organization sited particular problems in California, Florida and a couple other states.

A recent study conducted by one of the country’s biggest lenders shows that about eight in 10 Americans back new laws to safeguard home loans and mortgages by modernizing and revamping the Federal Housing Administration.

Proposed in Congress weeks ago, the Expanding American Homeownership Act of 2007 would overhaul and modernize the FHA, making home loans more affordable and secure for prospective homeowners.

The survey by Wells Fargo found that 77 percent of Americans support an stronger FHA and 83 percent of people between 25 and 34 support the new legislation.

Almost half of the first-time homebuyers last year were in that age group, according to the National Association of Realtors.

The country’s top housing official, U.S. Housing and Urban Development Secretary Alphonso Jackson, pointed to the survey as a major sign that Americans are ready for housing reform.

“Americans want financially sound options,” he said during a speech at the Wells Fargo Housing Symposium. “Americans are in support of an FHA that could help even more first-time home buyers and people with moderate incomes have access to safer mortgages. This survey demonstrates the urgent need for Congress to pass legislation that modernizes the FHA to help both promote and protect homeownership.

“The housing market can, and will, continue to grow. After all, homeownership stands near the all time high,” Jackson continued. “Nearly 70 percent of all American families own a home. We should view that fact with pride. But there is work to be done. If we are going to stimulate growth in the housing market we will have to wisely engineer some important changes”.

Forclosure or failed mortgages will strike more than 2 million American homeowners in the subprime market by the year’s end, according to the Center for Responsible Lending, a nonprofit advocacy group. The cost in lost equity will near $164 billion.

About one in five people who obtained subprime mortgages in the last two years will wind up in foreclosure, according to the center.

More than a half-million borrowers have lost their homes in the subprime market, and industry experts project that another 2 million or so are likely to meet a similar fate as the subprime crisis spirals.