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.

WASHINGTON — Federal Reserve Chairman Ben Bernanke said Thursday that he did not believe the growing number of mortgage defaults would seriously harm the economy.

Facing criticism from members of Congress about lax regulation, Bernanke also promised that the Fed would do everything possible to crack down on abuses that have put millions of homeowners in jeopardy of defaulting on their mortgages.

“We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers,” Bernanke said in remarks prepared for a financial conference in Chicago.

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Democrat Charles Schumer introduces proposals to tame the ‘Wild West’ of sub-prime lending.

WASHINGTON — In a bid to stop a wave of foreclosures, Sen. Charles E. Schumer (D-N.Y.) on Thursday urged Congress to approve $300 million for counseling and outreach efforts to help beleaguered borrowers hold onto their homes through refinancing deals and other financial strategies that would require cooperation from private lenders.

Schumer also proposed legislation to hold mortgage brokers and independent, non-bank lenders such as Ameriquest Mortgage Co. legally responsible for making loans that borrowers can understand and can afford.

The separate proposals represent the first legislative attempts to address the problem of rising foreclosures, a situation that has worsened nationwide during the last year. In many cases, borrowers were enticed by artificially low entry costs. The loans, often marketed by brokers and independent lenders, eventually soared in cost.

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