The PMI Group's bankruptcy reorganization hit a snag when a private-equity investor backed out of plans to take a stake in a reorganized insurance entity.

The equity firm was at one point pursuing a minority equity interest in PMI's new entity once it emerges from bankruptcy, the company said.

The PMI Group, which entered into Chapter 11 bankruptcy reorganization last year, announced the loss of its potential investor in a securities filing, adding "there can be no assurance that the company will identify or pursue an alternative transaction or that any alternative transaction will be completed."

And if the company moves forward without a third-party investor, PMI says there can be no guarantee that the reorganization plan will be confirmed in its current form.

PMI has been embattled for more than a year. In 2011, the Arizona Department of Insurance seized the firm and later PMI entered into bankruptcy reorganization.

PMI’s bankruptcy came at a time when private mortgage insurers were pushing for a place in the future mortgage market, while dealing with issues stemming from a recent housing crisis and a lack of new business as the housing market sorted itself out.

Today, there are stronger players in the market looking for business, but the future for mortgage insurance is not completely laid out.

What is known is PMI had assets that other parties consider attractive. This year, Arch Capital Group signed a deal to acquire the CMG Mortgage Insurance unit owned by PMI Mortgage Insurance Co.

Arch Capital expressed confidence in the private MI market at the time, saying the move would allow it "to enter the rapidly improving U.S. mortgage insurance marketplace."