Countrywide Financial, the biggest mortgage lender in the US, has reported a 41% fall in home loans in January.
Last month, Countrywide funded mortgages totalling $21.9bn (£11.1bn), compared with $37.1bn a year ago, while foreclosures reached record highs.
Countrywide said the foreclosure rate among the 9m mortgages for which it collects and processes payments doubled to 1.48%, up from 0.77% a year earlier.
Bank of America in January agreed to buy the firm for $4bn (£2bn).
"Many of the weakest markets have experienced job and population losses"
Homeowners struggle
The stark figures show the difficulties emerging in the US housing market are hitting lenders.
Countrywide's foreclosure rate has been steadily rising, from December's rate of 1.44% and November's 1.28%.
Foreclosure is the legal process taken by mortgage companies when homeowners fail to keep up their loan repayments.
The delinquency rate - a measure of missed mortgage payments - rose to 7.47% of unpaid balances from 4.32% percent a year earlier.
While the housing market is struggling a survey has suggested that certain areas are more affected than others.
Mixed market
There have been fears that the troubles in the housing market could send the US into a deep recession, but a National Association of Realtors (NAR) report suggests the gloom may be overdone.
RISING HOUSE PRICES
The group said prices rose in 73 out of 150 urban areas in the last three months of 2007 from a year earlier.
The Cumberland area in rural Maryland saw the most healthy rises, with 10 other areas recording gains of 10% and more, including Yakima in Washington.
The median house price for the country fell 5.8% to $206,200 (£105,121) - the sharpest fall since records began in 1979.
But the realtors group said the typical seller who purchased their home six years ago still saw a gain of 31.2%.
Bright pockets
"The healthiest housing markets today generally are moderately priced and are experiencing job growth and often population growth, which in turn is supporting strong price growth," said Lawrence Yun, NAR's chief economist.
FALLING HOUSE PRICES
"Most of the weakest markets have either experienced both job and population losses, or they are experiencing corrections following a prolonged period of rapid price growth."
He also blamed falling transactions in sales of more than $417,000, where mortgage repayment rates have been high as a result of the credit crisis, for "dampening the national median price as well as the data for some of the more expensive markets".
Higher limits for large loans from the Federal Housing Association to $729,750 will help "high income, credit-worthy borrowers in high-cost areas", NAR president Richard Gaylord said.
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