Mortgage insurers such as Radian Group (RDN) and PMI Group (PMI) have been suffering from rising mortgage defaults. But the group could be turning the corner. On Tuesday, the largest U.S. mortgage insurer, MGIC Investment Corp. (MTG), posted a quarterly profit of $24.6 million compared to a loss of nearly $340 million in the year-ago quarter. That good news comes after three years of losses.

MGIC's results should bode well for Radian, which will announce its second quarter results on August 3, and PMI Group, which will release its second quarter results on July 29.

TheStreet.com's Jim Cramer says the mortgage problem is in the process of cresting, which is why the stocks have largely bottomed.

We are in the heart of default country, and we knew we would be. This is the toughest moment. You need to go back and look at the calendar to realize the astonishing acceleration in defaults. It's simple: This moment two years ago is when the underwriting standards were the lowest, and this is the moment when the defaults will be the highest because the loans are resetting at high levels and most of the lenders, lenders like Countrywide (NYSE: CFC) (Cramer's Take), are more interested in getting as much out of a borrower as possible before kicking him out than working out the loan.

Think about it.

In the second quarter of 2006, the housing industry was going strong. We were in the 7-million-homes-changing-hands mode, and the vast majority of those homes required little money down, with home equity loans being taken out immediately to pay whatever little interest was being charged. These were the moments of the ultimate no-doc-high-fee loans by New Century Financial, Ameriquest, Resmed (Ditech), American Home Mortgage, Novastar, and of course, Countrywide. This was when the homebuilders' mortgage arms lent the most terribly.

TheStreet.com's Jim Cramer says the guys at the top don't know what they're doing, and it shows.

AIG's (NYSE: AIG) (Cramer's Take) making everyone's life difficult today. That's in part because AIG had been the biggest proponent of "super senior," meaning they repeatedly said that their collateralized debt obligation (CDO) exposure was of the kind that was intelligent, measured and thoughtful. They talked endlessly about how their due diligence made the difference and that unlike all of the other buyers, they kicked the tires three times and never bought the plain ol' CDOs. Then they brought in professors from Wharton to be sure that even if all heck broke loose and they were being too aggressive, they would be hedged.

They also were the first to give you the percentages of how much could go bad and that even in the worst-case scenario, they were overcapitalized. And, most important, they were insurers, no need to mark to market, they can play it all out.

Plus, they touted their own struggles. They made the point that because of the turmoil at the top, they hadn't bought any bad stuff and stopped buying residential real estate products after 2005. What they did buy -- they assured us in that big teach-in dog-and-pony show in December -- was the extra-special nature of their particular buys and that, unlike everyone else, risk officers scrutinized every single piece of paper that went into their super senior insurance, meaning only the top-top part of a CDO-squared, the part where everything had to default ahead of it; they made a point of how impossible that would be.

Hovnanian Enterprises Inc. (NYSE: HOV) deserves kudos turning lemons into lemonade. This weekend, the upscale homebuilder had a "sale" where lucky home buyers could get about $100,000 in price cuts through incentives, upgrades and add-ons. Media reports indicate that it was a huge success.

Thousands of people lined up at Hovnanian developments in 19 states over the weekend for what the company dubbed as "The Deal of the Century," according to CNBC. You can bet that other home builders including Lennar Corp. (NYSE: LEN) and Toll Brothers Inc. (NYSE: TOL) took note of Hovnanian's success and will follow suit. Banks stuck with huge amounts of foreclosed properties might also start to get creative as well. It's a good sign but people shouldn't expect miracles.