Shares Radian Group Inc. tumbled Monday after the mortgage insurer announced a public offering of convertible notes and disclosed it received a government subpoena.

Radian said it's publicly offering up to $350 million in convertible senior notes due 2017. The underwriters have the option to buy an additional $52.5 million of notes. The company said it plans to enter in a "capped call" to prevent the dilution of its shares once the debt is converted to stock.

But that did little to ease investor concerns. The stock of the Philadelphia company dropped $1.16, or 12 percent, to $8.79 in early afternoon trading.

The company also said Monday in a Securities and Exchange Commission filing that it received a subpoena from the U.S. Department of Housing and Urban Development asking for information on the company's captive reinsurance.

Under certain so-called "captive reinsurance" programs, insurers and lenders share premium revenue but also split exposure to any losses when borrowers default. Insurers take the primary loss, and lenders bear secondary exposure up to certain limits, after which insurers are saddled with the additional losses.