Thornburg Mortgage Inc. (NYSE: TMA) Chief Executive Larry Goldstone said there is a "crisis of confidence" in the mortgage market.

No kidding.

Shares of Thornburg fell about 9% after Goldstone made that insightful comment on CNBC. They are down 45% for the year amid concerns about the subprime mortgage meltdown. Thornburg sold about $20.5 billion in mortgage-backed securities today to return to "business as usual" -- whatever that means.

Worries about subprime mortgages continued to weigh-down the market, as did the drop-off in oil prices caused by weather forecasts that indicated Hurricane Dean wouldn't hit the oil-producing areas of the Gulf of Mexico. The Dow Jones industrial average and the Nasdaq Composite Index managed to hang onto positive territory for now as investors continued to hope -- make that pray -- that Fed Chairman Ben Bernanke will eventually cut interest rates.

News in the housing market has gone from bad, to worse, and back to bad again. Real estate and mortgage markets that are starting to stabilize after hovering on the brink of disaster during much of the summer. (Update: Housing numbers released August 24 showed an uptick in new home sales in July over June -- a positive surprise). Central banks around the world, including the U.S. Federal Reserve have bolstered a financial system crippled by excessive sub-prime lending.

Still, many experts believe the financial crisis could worsen from here, dragging more homeowners and would-be homeowners into the mess. Given all this, you are probably wondering what the mortgage meltdown means to you. Let's look at these questions:

What if you have a mortgage with a company that goes bankrupt, do you still have to pay?

Yes. If your mortgage company files for bankruptcy, another company will take over the servicing of the mortgage. The new owner of your mortgage will expect you to pay every month. If you stop payment because you think your bankrupt mortgage company won't care, prepare for the consequences. I posted more about this here.

What happens if you're applying for a mortgage with one of these troubled mortgage companies?

You might not qualify for a mortgage that you could have gotten a month ago. If you started the home buying process, say a month ago, and you haven't locked in a rate that you could afford, chances are good that your options have gotten worse. (Even if you have locked in a rate, the mortgage company might try to get out of the lock if there's any legal wiggle room.) That's because there's less money around for mortgages since the credit crunch started a few weeks ago. The people who get that mortgage money will be the ones willing and financially able to pay a higher rate.

Foreclosure rates, which jumped an astounding 90% in May, are showing no signs of slowing as something like $2 trillion worth of adjustable rate mortgages are due to reset at higher interest rates.

Once red-hot real estate markets, including Las Vegas, are now ice cold and speculators are being forced to dump properties that they bought at the height of the real estate bubble. The market doesn't look like it will rebound until late in the year at the earliest.

What makes these statistics particularly surprising is that mortgage companies typically want to avoid foreclosures. It's a costly, time-consuming process that can drag on for months. Once a bank gains possession of the home, it has to go through the hassle of finding a new buyer. I don't know whether this data indicates that lenders don't think it's worth the effort to help out home owners or that they've already exhausted every means at their disposal to help them.

The hurt goes beyond subprime mortgages.

If people don't get good prices for their homes, they won't be able to upgrade into more expensive ones, which is why home builders including Toll Brothers Inc. (NYSE: TOL) continue to suffer. Bloomberg News notes that the Mortgage Bankers Association estimates that investment in the residential housing industry, which includes purchases and expenditures for equipment such as heating and air-conditioning, fell 17.2% in the first quarter.

All of this is especially bad news for first-time home buyers. Credit standards are being ratcheted up so high that many people who would have qualified for loans six months ago can't get a mortgage today, according to Bloomberg News.