Hussman Funds suggests that we're in the early innings of the mortgage meltdown. I'd say we're in the second inning. I agree with Hussman because of his chart that shows only about 25% of the cumulative mortgage resets have occurred. As Adjustable Rate Mortgages (ARMs) reset upwards, that means the mortgage holders will either have to cough up more money each month to pay a higher mortgage rate or they'll default on the mortgage and throw their home into foreclosure.

Either outcome puts greater strain on the financial system, which will draw out the mortgage meltdown further. If homeowners keep paying the mortgage after it adjusts upward, that homeowner is squeezed since median incomes are flat. With 70% of GDP growth coming from consumer spending, this means a slower economy.

A slower economy means that people will get laid off, which will result in more homeowners who can't pay their mortgages – thus throwing more houses on the market and making the mortgage meltdown worse. If people default on the resets, that immediately throws more houses on the market.