Standard & Poor’s has placed seven mortgage insurance companies on its CreditWatch with negative implications, meaning a downgrade is likely.

The groups included in the action are Old Republic, PMI, Radian, Genworth, United Guaranty, CMG Mortgage, and California Housing Loan Insurance Fund (CAHLIF). The ratings agency already downgraded Mortgage Guaranty Insurance Corp. (MGIC) earlier this month and revised its outlook for the company to “negative.”

S&P said in its ratings report that the mortgage insurance industry continues to face significant challenges during 2009, with many insurers reported losses that exceeded the agency’s estimates.

“We believe that the macroeconomic environment may be having an increasingly negative impact on the prime mortgage insurance books, suggesting an elongation of the loss cycle beyond our prior expectations,” S&P wrote.

According to Standard & Poor’s credit analyst Ron Joas, when the agency last conducted an extensive review of the mortgage insurance sector in April, S&P expected insurers to report losses through 2010 and possibly into 2011, but Joas says he also expected some mitigation of losses beginning in the second half of 2009.

Since that assessment, Joas says, conditions have become even more strained. Mortgage insurers are experiencing a sharper and more rapid transition of delinquencies into prime books of business and further deterioration is expected.

Claims payments remain below expectations as a result of the backlog of foreclosures and the moratoria implemented earlier in the year, the ratings agency said.

S&P cited Milwaukee, Wisconsin-based MGIC as a tell-tale example. The company reported a loss ratio of 331 percent for the third quarter of 2009, compared with a loss ratio of 222 percent in the second quarter. S&P said the disappointing numbers were largely due to a significant increase in the delinquent loan inventory caused, in part, by a sharp transition of delinquencies into prime loans.

Similarly, Chicago-based Old Republic International’s mortgage segment reported a loss ratio of 214 percent for the third quarter, up from 198 percent in the second quarter, because of an increase in delinquency rates.

S&P plans to perform a detailed review of each mortgage insurers’ portfolios and third-quarter results, focusing on the shift of delinquencies to prime loans and the extend to which ongoing rescission may mitigate losses.