The weekly survey of Mortgage Applications (see here for details), released today by the Mortgage Bankers Association (MBA), showed that the mortgage applications dropped to a seven-month low for the week ending June 26, 2009.

MBA’s seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, decreased 18.9% to 444.8, the lowest level since November 21, 2008.

The index of refinancing applications decreased 30.0% to 1,482.2, also the lowest since November 21, but was up 16.8% year-over-year. Refinancing accounted for 46.4% of applications, down from 54.0% for the previous week and significantly down from the high of 85.3% for the week ended January 9, 2009.

Mortgage rates, which had declined to record lows since the Fed started its massive mortgage-backed securities (MBS) purchase program, have been creeping up in recent weeks and remained above 5% for a fifth straight week. Refinancing activity is very sensitive to mortgage rates and has thus come down sharply in recent weeks.

Further, though the pace of decline of housing prices has moderated, it is still on a downward trend. Foreclosures have been rising, discouraging many potential buyers.

This is certainly not good news for banks like Wells Fargo (WFC), BB&T (BBT), Bank of America (BAC) and Citigroup (C), which had benefited a lot from the surge in refinancing activity during the first quarter.

Read the full analyst report on “WFC”
Read the full analyst report on “BBT”
Read the full analyst report on “BAC”
Read the full analyst report on “C”
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