Private Mortgage Insurance (PMI) rates have increased dramatically within the last year. This is due to the fact that mortgage defaults are up 40 percent, and mortgage insurers have had to pay out $6 billion in claims.

Private Mortgage Insurance is insurance paid to the lender if the home buyer defaults on the home loan.

In order to keep those defaults from causing PMI's collapse, PMI companies have made the following changes:

1. They have tightened underwriting guidelines to include higher minimum credit scores and maximum loan-to-values
2. They have increased their fees.
   

These changes have made it more expensive and more difficult for small down payment home buyers to purchase homes.

If you or someone you know is planning to purchase a home with a small down payment or refinance their current mortgage, now would be the time. With defaults expected to continue to rise through 2009, it's likely that PMI rates will increase again.

Image source: The Wall Street Journal