NEW YORK, Feb 29 (Reuters) - Defaults on privately insured U.S. mortgages rose 31.3 percent in January to the highest level on record, as more homeowners failed to keep up with their loan payments.

The Mortgage Insurance Cos of America said on Friday 68,950 insured borrowers were at least 60 days late on payments in January, up from 52,528 a year earlier, and up 7.1 percent from December.

Defaults have topped 60,000 for three straight months, a level not previously reached since data were first tabulated in 2001. Late payments are often a precursor to foreclosure.

Private mortgage insurance lets people buy homes with down payments of less than 20 percent and guarantees lenders will be repaid even if borrowers default.

Lenders nationwide have been tightening their underwriting standards, forcing prospective homeowners either to put more money down or to find new means to borrow -- if not to buy less costly homes or defer purchases altogether.

The largest U.S. mortgage insurers, MGIC Investment Corp (MTG.N: Quote, Profile, Research) and Radian Group Inc (RDN.N: Quote, Profile, Research), lost a combined $2.09 billion in the fourth quarter, as they boosted reserves for losses. Both also lost money in the third quarter.

American International Group Inc (AIG.N: Quote, Profile, Research), the world's largest insurer by assets, said on Thursday its United Guaranty Corp mortgage insurance unit had a $348 million fourth-quarter operating loss.

The number of traditional mortgage insurance policies issued was 125,200 in January, up 32.1 percent from a year earlier, but the fewest in 11 months, MICA said. The amount written was $21.7 billion, an eight-month low.

On the other hand, primary insurance in force rose 24 percent from a year earlier to $832.7 billion. MICA spokesman Jeff Lubar said this suggests "a strong underpinning for the mortgage insurance business."

Washington, D.C.-based MICA compiles its data from information provided by six mortgage insurance providers: MGIC, United Guaranty, Genworth Financial Inc (GNW.N: Quote, Profile, Research), Old Republic International Corp (ORI.N: Quote, Profile, Research), PMI Group Inc (PMI.N: Quote, Profile, Research) and Triad Guaranty Inc (TGIC.O: Quote, Profile, Research). Radian is not included. (Editing by Andre Grenon)