A class-action shareholder lawsuit has been filed against Radian Group, the mortgage insurer whose endangered half-billion dollar stake in a subprime mortgage investor has sunk its stock price and put a planned merger with rival MGIC Investment Corp. in doubt. The U.S. District Court suit, filed in Philadelphia by San Francisco-based law firm Lerach Coughlin Stoia Geller Rudman & Robbins, is on behalf of investors who bought securities between Jan. 23 and July 31, the firm said late Wednesday.

Among other things, the suit stated, Radian of Philadelphia failed to disclose that its $518 million investment in Credit-Based Asset Servicing and Securitization, known as C-BASS, was materially impaired and quickly declining in value, and that it overstated financial results by failing to write-down that investment in a timely fashion.

Radian (NYSE:RDN) has said that the entirety of its investment in C-BASS may be lost. Since Radian issued a statement July 30 about the investment, its stock price has tumbled far below its pre-announcement price of about $40. It was trading down 3 percent Thursday at $16.14.

MGIC (NYSE:MTG) of Milwaukee has said it is not obligated to go through with the merger but Radian has disputed that. The stock deal was originally valued at nearly $4.9 billion, but shares of both companies have lost more than half their value since it was announced Feb. 6. The deal called for an exchange of shares with Radian's stock valued at $60.78 per share