) -- Mortgage insurance stocks plummeted Monday after

MGIC Investment Corp.

(MTG) - Get Report

reported a second quarter loss that was more than 10 times worse than the most pessimistic analyst estimate.

MGIC reported a second quarter loss of 75 cents per share, compared to a consensus of a penny gain among analysts surveyed by

Thomson Reuters

. The six analysts were in a range of a 15 cents gain on the high end and a seven cent loss on the low end.

Shares of MGIC fell 23% to close at $4.62.

Radian Group

(RDN) - Get Report

was down by 13.79% to $3.50, and

PMI Group

( PMI) was lower by 12.60% to $1.11.

Genworth Financial

(GNW) - Get Report


Old Republic International

(ORI) - Get Report

, more diversified insurers that also offer mortgage insurance, were down by 9.06% and 4.06%, respectively.

"The loss reflects the continued impact of the weak housing markets and high unemployment as well as the typical seasonal patterns regarding new notices and cures," said MGIC CEO Curt Culver.

Michael Grasher, analyst with Piper Jaffray, believes higher-than-expected payouts were the reason for the selloff. MGIC paid out more than $840 million on defaulted mortgages versus Grasher's forecast of $709 million.

However, Grasher was actually encouraged by the results.

"The credit picture improved across the board," he said, noting that management said losses have likely peaked during a conference call following earnings.

"The higher paid losses are actually a positive," Grasher says. He argues the payouts were on long-delinquent mortgages.

"They need to get the risk off the balance sheet and to the extent that we can get those

delinquencies behind us that would generate a great deal more transparency about future earnings."

Grasher has an "overweight" rating on MGIC.


Written by Dan Freed in New York


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.