Answer: It's normal for Mugo pines to drop their oldest needles - those on the interior of the branches or those that are too shaded, but what you describe doesn't sound all that normal. Since your Mugo has new growth on the tips of the branches, I suspect the roots are okay. The needles may have dropped because of an insect infestation or because of harsh winter weather. As new needles develop the branches should elongate and you'll eventually have more and more growth which will make it more attractive. You might want to check for spidermites (look for webbing where the needles meet the branch). Wish I had more to share.
Best wishes with your landscape!
Q&A Library Searching Tips