* To pay 60 pct of claims in cash * Rest to be paid by creating deferred payment obligation

April 1 (Reuters) - Mortgage insurer Triad Guaranty Inc (TGIC.O: Quote, Profile, Research) said it will pay 60 percent of valid claims under its mortgage guaranty insurance policies in cash and the rest by creating a deferred payment obligation (DPO).

Triad said it received a corrective order, related to the payments, from the Illinois Director of Insurance, that will be effective June 1 or a later date established by the Illinois Director.

The DPO will be represented by a separate entry in Triad's financial statements and will accrue a carrying charge based on the yield earned by its investment portfolio, the company said.

"Payments of the carrying charge and the DPO will be subject to Triad's future financial performance and will require approval of the Illinois Director," the company said.

Continuing volatility in the housing and mortgage markets and a high incidence of fraud and noncompliance makes it tough to forecast Triad's future financial position and claims, Chief Executive Ken Jones said in a statement.

"The significant and rapid decline in housing prices over the past two years, coupled with the ongoing recession, contributed to a high default rate in our insured loans," Jones said.

Mortgage insurers have suffered huge losses from backing subprime bonds and mortgages that saw a surge in defaults as credit and housing markets in the United States worsened, affecting economies globally.

Triad Guaranty said in a regulatory filing last month that recurring losses from operations raises substantial doubt about its ability to continue as a going concern.

Shares of the company closed at 18.88 cents Wednesday on Nasdaq. They traded as high as $5.43 a year back. (Reporting by Anurag Kotoky in Bangalore; Editing by Ratul Ray Chaudhuri)