Radian rose 1.7 percent to $13.92 at 10:12 a.m. in New York, extending its gain this month to 16 percent. MGIC added 1.9 percent to $6.19 and has climbed 15 percent since April.

Sales of private mortgage insurance jumped 78 percent in the first quarter from a year earlier, according to Inside Mortgage Finance, as the U.S. scaled back its role in the market and home sales rose. Radian was the top seller, followed by American International Group Inc.’s United Guaranty, MGIC, and Genworth Financial Inc.

The Federal Housing Administration has raised premiums to back mortgages, and some lawmakers have pressed the U.S. to further reduce its role in the real estate market. FHA and other U.S. programs accounted for 67 percent of the mortgage insurance market in the first three months of this year, down from 74 percent in the same period of 2012, Inside Mortgage Finance figures show.

Regain Share

“Our strengthened financial condition puts us in a position to regain market share,” MGIC Chief Executive Officer Curt Culver said on an April 30 conference call with analysts. “Returns on the new business are very strong and should continue to be so given the outstanding credit quality of the business.”

Some funds are scaling back after the rally. Saba Capital Management LP, run by Boaz Weinstein, cut its MGIC stake by 87 percent from three months earlier to 1.2 million shares as of March 31. Jonathan Gasthalter, a spokesman for the New York- based firm, declined to comment.

The companies also have debt ratings that indicate very high credit risk. MGIC, which lost its investment grade status in 2009, is ranked Caa3 by Moody’s, while Radian is two levels higher at Caa1.

Too Optimistic

Investors may be too optimistic about the prospects for a quick shift of the housing market from government backing to private capital, Jason Stewart, an analyst at Compass Point Research & Trading LLC., wrote in a May 1 note.

“Assigning a value greater than $5 to MTG shares today is akin to making a wager on the government’s propensity and ability to transform the U.S. housing finance market,” he wrote, using the ticker symbol for MGIC. “Historically, this wager has been met with outcomes most private MI common equity holders would classify as massively disappointing.”