Applications for residential mortgages fell last week for the first time in three weeks, due to a sharp drop in demand for home-purchase and refinancing loans, Reuters reported.

The Mortgage Bankers Association announced this morning that its seasonally adjusted index of mortgage application activity fell 5.5 percent to 641.1 in the week ended August 17.

Applications, however, may have climbed earlier in August as a major lender hurt by turmoil in mortgage bond and other financial markets closed its doors, forcing borrowers to reapply elsewhere, said Jay Brinkmann, a vice president of research at the MBA.

“The drop in applications we see here may be an indication that those borrowers have now been taken care of,” he said.

American Home Mortgage Investment Corp., the 10th-largest U.S. lender in the first half of 2007, on Aug. 2 said it stopped making loans. Creditors pulled support from the company, which specialized in making loans to borrowers with credit profiles better than subprime but below prime.