Steve Wevodau

WALNUT CREEK, Calif., Jan. 14 /PRNewswire-FirstCall/ — PMI Mortgage Insurance Co., (NYSE: PMI - News), today released its Winter 2009 Economic and Real Estate Trends Report, and its widely cited U.S. Market Risk Index(SM). The index shows that the risk of lower house prices two years from now increased broadly across the nation — rising in 369 of 381 MSAs (Metropolitan Statistical Areas) or 97 percent — highlighting the breath of the economic and housing downturns.

PMI estimates that half of the nation’s 50 largest MSAs have an elevated or high probability of seeing lower house prices by the end of the third quarter of 2010, relative to the third quarter of 2008. A growing number of MSAs in the Industrial Midwest and along the East Coast show an increase in probability of lower home prices in two years.

“The two primary drivers of increased risk scores across a broader segment of MSAs are the continued high level of foreclosures and rising unemployment,” said David Berson, PMI’s Chief Economist and Strategist. “These factors will put additional upward pressure on risk, with increases in affordability and lower mortgage rates providing some offset.”

PMI’s U.S. Market Risk Index(SM) ranks the nation’s 381 largest MSAs according to the likelihood that home prices will be lower in two years. Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years. The Risk Index uses economic, housing, and mortgage market factors (including home price appreciation, employment, affordability, excess housing supply, interest rates, and foreclosure activity) to determine these probabilities. Among the nation’s 50 largest MSAs, 23 had a risk score exceeding 50, indicating a greater than 50 percent chance of prices being lower in those markets in 2 years.

In an effort to enhance forecasting accuracy, the Winter 2009 Risk Index incorporates a new home price index. PMI now bases its estimates on the more precise MSA-level Repeat Transaction Home Price Index from Loan Performance (a division of First American CoreLogic, Inc.). Previously the company based its estimates on Federal Housing Finance Agency (FHFA, formerly the Office of Federal Housing Enterprise Oversight, OFHEO) data. This change better reflects the breadth of mortgage market transactions and eliminates any bias on home prices resulting from the inclusion of refinancing activity. PMI also moved from utilizing state-based measures of mortgage foreclosure activity to MSA-based data to better reflect the impact on house prices from foreclosures at the local level. A complete copy of the Winter 2009 PMI Economic and Real Estate Trends(SM) (ERET) report and Appendix that provides data for all 381 U.S. MSAs is available at: http://www.pmi-us.com/eret.

Housing affordability was little changed in the third quarter from the second, caused mostly by a slowing in personal income growth in response to rising unemployment rates as the recession deepened. Moreover, mortgage rates were higher in most of the third quarter as the credit crunch worsened. PMI’s proprietary Affordability Index measures today’s housing affordability in a given MSA relative to its 1995 baseline. An Affordability Index score exceeding 100 indicates that homes have become more affordable; a score below 100 means they are less affordable.

For all 381 MSAs, the weighted average Affordability Index reading was 114.5 in the third quarter, compared with the second quarter reading of 115.5. Across the nation, 62 percent of the MSAs showed marginally lower affordability. Affordability improved slightly, however, in 59 percent of the 100 MSAs ranked in the two highest risk classifications, mostly in response to sharply falling house prices — which averaged a 14.0 percent decline from a year-earlier, far exceeding the drop in income growth over the period.

          Winter 2009 PMI U.S. Market Risk Index (3rd Quarter 2008)

          10 Riskiest and 10 Most Stable MSAs out of 50 Largest MSAs

     10 Riskiest of the 50 Largest MSAs  10 Most Stable of the 50 Largest MSAs
                                    Afford-                            Afford-
    Risk                      Risk  ability  Risk                 Risk ability
    Rank       MSA            Index Index    Rank        MSA      Index Index

    High Riverside-San Bern.-  99.9  89.04  Minimal  Dallas-Plano-  <1  129.85
         Ontario; CA                                 Irving; TX
    High Miami-Miami Beach-    99.9  88.23  Minimal  Fort Worth-    <1  132.60
         Kendall; FL                                 Arlington; TX
    High Ft. Lauderdale-       99.8  93.33  Minimal  Houston-Sugar  <1  130.14
         Pompano Beach-                              Land-Baytown;
         Deerfield Beach; FL                         TX
    High Los Angeles-Long      99.8  89.86  Minimal  Pittsburgh; PA <1  131.87
         Beach-Glendale; CA
    High W. Palm Beach-Boca    99.6 102.11  Minimal  San Antonio;   1.0 120.62
         Raton-Boynton Bch; FL                       TX
    High Las Vegas-Paradise;   99.4 122.23  Minimal  Charlotte-     2.2 127.47
         NV                                          Gastonia-
                                                     Concord; NC-SC
    High Tampa-St.             99.2  98.03  Minimal  Columbus; OH   2.8 137.78
         Petersburg-
         Clearwater; FL
    High Orlando-Kissimmee; FL 98.7 100.06  Minimal  Cleveland-     3.4 156.48
                                                     Elyria-
                                                     Mentor; OH     3.9 128.53
    High Santa Ana-            98.3  91.71  Minimal  Indianapolis
         Anaheim-Irvine; CA                          -Carmel; IN
    High Jacksonville; FL      97.3  95.95  Minimal  Denver-        4.1 115.06
                                                     Aurora; CO

About PMI’s Economic & Real Estate Trends(SM) (ERET) and U.S. Market Risk Index(SM)

The PMI Economic and Real Estate Trends (ERET) containing the US Market Risk Index is published quarterly by PMI Mortgage Insurance Co., (NYSE: PMI - News). The Risk Index is a proprietary statistical model that measures geographic house price risk by predicting the probability that home prices in the nation’s 381 largest metropolitan statistical areas (MSAs) will be lower in two years. The PMI U.S. Market Risk Index is based on data including the Repeat Transaction Home Price Index from Loan Performance, labor market statistics from the Bureau of Labor Statistics, and the PMI Affordability Index, which uses local per capita household income, home price appreciation, and a blended mortgage rate to calculate the local share of mortgage payment to income relative to its baseline year of 1995. The PMI U.S. Market Risk Index scale ranges from one to 100 and translates to a percentage. For example, a score of 50 indicates a 50 percent chance that home prices will be lower in two years.

About PMI Mortgage Insurance Co.

The PMI Group, Inc. (NYSE: PMI - News), headquartered in Walnut Creek, CA provides credit enhancement solutions that expand homeownership while supporting our customers and the communities they serve. Through its wholly and partially owned subsidiaries, PMI offers residential mortgage insurance and credit enhancement products. For more information: http://www.pmigroup.com.

Cautionary Statement: Statements in this press release that are not historical facts or that relate to future plans, events or performance are ‘forward-looking’ statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, PMI’s U.S. Market Risk Index, Affordability Index, and any related discussion, and statements relating to future economic and housing market conditions. Forward-looking statements are subject to a number of risks and uncertainties including, but not limited to, the following factors: changes in economic conditions, economic recession or slowdowns, adverse changes in consumer confidence, declining housing values, higher unemployment, deteriorating borrower credit, changes in interest rates, or a combination of these factors. Readers are cautioned that any statements with respect to future economic and housing market conditions are based upon current economic conditions and, therefore, are inherently uncertain and highly subject to the changes in the factors enumerated above. Other risks and uncertainties are discussed in our SEC filings, including our Annual Report Form 10-K for the year ended December 31, 2007 (in Item 1A) and our Quarterly Report on Form 10-Q for the quarter September 30, 2008. We undertake no obligation to update forward-looking statements.