Most people tend to assume that the worst of the mortgage crisis is behind us. Executives at private mortgage insurers, however, do not have the luxury of that assumption. Barron's has weighed in with an in-depth look at MGIC, Radian and PMI and concludes that these companies represent the next domino to fall as the mortgage crisis moves on.

Here's the sobering bottom line: "The three big monoline insurers--MGIC, Radian and PMI, which comprise 60 percent of the industry--appear woefully undercapitalized to meet the claims that loom over the next couple of years, as defaulted mortgages residing in their inventories rumble through the foreclosure pipeline to eventual insurance payoffs. In fact, there's a distinct possibility that the coming avalanche could more than wipe out the three companies' shareholder equity, with no new sources of capital available. Such an occurrence would be game, set and match for the insurers. At the very least, the three monolines will face a day of reckoning with state regulators if their risk-to-capital ratios blast through the 25-to-1 ratio fail-safe point, possibly relegating them to run-off status, in which they'd be unable to write new business. PMI is now close to 25 percent, while MGIC and Radian are near 20 percent."

The stocks have already priced in lots of bearishness. From highs above 60, the shares of both Radian and MGIC now trade at pre-split Citigroup levels. Another insurer, Triad, is now under the supervision of the state of Illinois.

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