Allstate Sues Bank of America, Countrywide Over Mortgage-Backed Securities

Allstate Sues Bank of America, Countrywide Over Toxic Mortgage-Backed SecuritiesInsurance giant Allstate (ALL) is suing Bank of America (BAC) and its Countrywide Financial division over Countrywide's sale of $700 million in mortgage-backed securities to Allstate, alleging that Countrywide knew in advance that the assets would drop in value because of a high percentage of defaults.

Allstate, which filed its claim in a Manhattan federal court on Monday, is seeking unspecified damages in its complaint, which stemmed from Countrywide's sales of the securities between 2005 and 2007, Allstate said in a statement on Tuesday. The company accuses Countrywide of violating its own mortgage underwriting standards starting in 2003 in order to boost its mortgage business. BofA acquired Countrywide in 2008 after it nearly collapsed during the financial crisis.

"This unfortunately appears to be a situation where a sophisticated investor is looking for someone to blame for a downturn in the economy and losses on an investment it made," BofA said in a separate statement today. The company is still reviewing the complaint.

Misrepresentations and Omissions

BofA continues to be affected by the fallout of the mortgage meltdown. The company is one of a number of U.S. institutions that said last month that they may incur costs defending lawsuits from investors in their mortgage-backed securities. BofA in particular said it's a defendant in cases alleging that documents relating to more than $375 billion in mortgage-backed securities may have contained misrepresentations and omissions, and failed to meet underwriting standards.

Wells Fargo (WFC) and Citigroup (C) also said in November that they were defendants in similar lawsuits, and that their costs may rise because of the resulting litigation.

Countrywide co-founder Angelo Mozilo in October reached a settlement agreement with the Securities and Exchange Commission related to charges of insider trading and civil fraud, allowing him to avoid standing trial. Mozilo will reportedly pay $67.5 million in fines. BofA wasn't charged by the SEC.

Its shares were about flat at $13.34 near the close of trading Tuesday on the New York Stock Exchange. Allstate shares were little changed at $32.02.

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robert.beron

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July 18 2013 at 2:15 PM Report abuse rate up rate down Reply
dtee8826

As an individual I'm planning to sue Bank of America. Everyone who are currently underwater now should join in and each individual should sue Bank of America or their current banks for manipulating the systems. And as a result the value of our homes are going down to drain to no fault of our own. These banks victimized us because of these short sales and foreclosures in our neighborhoods pulling the values of our properties down too. If these banks did their jobs and scrutinized every applications over profits. The values of our properties would not suffer. The individual I'm talking about that should sue Bank of America are the ones like myself who pay their mortgages on time and didn't treated their homes like piggy banks. We are suffering because of these banks greediness and didn't do what they supposed to do. I think I have a strong case because my house that I considered my investment like everyone else, lost value because banks approved these loans without proper verifications that these buyers could afford the loans or knew about it and still loaned them knowing that these banks were going to sell the loans anyway to wall street knowing millions of borrowers would default as Allstate will prove in court against Bank of America.

December 31 2010 at 3:52 AM Report abuse +1 rate up rate down Reply
johnhen56

Just another example of "trying to cash in" What in the world is an insurance company investing in mortgages? To "make a killing" of course and now when the bottom dropped out Allstate wants their money back. They made the mistake they should have to "suck it up"

December 29 2010 at 6:53 PM Report abuse rate up rate down Reply
mrscofla1

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December 29 2010 at 5:58 PM Report abuse +1 rate up rate down Reply
sfamilyent

I'm sure that no one is surprised by this. The bigger investors have enough money to pursue recovery of some of their losses, while the millions of people who lost their jobs, their houses, and their savings are just S. outta luck. All of the financial companies and big investors that pulled in huge profits during and after this financial fiasco should be acting to return those profits to their customers and that taxpayers that bailed their butts out.

December 29 2010 at 10:22 AM Report abuse +1 rate up rate down Reply
jkennedy806

Didn't Wells Fargo and Citi say that there paperwork is in order. Oh John Stumpf, your paperwork is not in order. In fact, I hope Edward Jones, yes, I know who one of the investors are, cleans your clock. I don't feel for you big banksters at all. You are worse than theives, perpetrated by financial terrorism.
EGO, Power GREED it's all about to fall in --

December 29 2010 at 10:01 AM Report abuse +1 rate up rate down Reply
Wayne

Oh what a wicked web we weave, when we first try to deceive. The problem with fraud is ... once you start fraud it begets fraud. It is one fraud after another and it even goes into being a Terrorist Threat to the American People. Where is my FBI on all of this?

December 29 2010 at 1:05 AM Report abuse +1 rate up rate down Reply
1 reply to Wayne's comment
lovesfirstkiss14

The FBI bragged a few weeks ago in Orange County at a seminar, about how they arrested 14 people in Ventura county linked to mortgage fraud operations on June 17, 2010. When a woman in the audience shouted the question, "when are you going to arrest the bankers on wall street for committing the same crimes to the whole country?", their reply was, "Where is the proof?". The whole audience booed and grumbled when another audience member asked "How much more proof do you need?" The woman on stage, (her name escapes me), one of the FBI's leading financial fraud investigators, said "There just isn't the tangible evidence we need to prosecute the banks for any wrong doing". So our FBI now has just admitted they too, have turned a blind eye to the criminal pillaging of the people of this country. How any of them finished school, got any sort of degree for anything, and then landed these positions in government and our nation's financial sector, without any hint of common sense in their entire being, is embarrassing and scary.

December 30 2010 at 3:26 AM Report abuse +2 rate up rate down Reply
Wayne

Way to go Allstate. Only through Bank of America's Greed did they get caught up in this. Why would Bank of America take over Countrywide? I know they had a big interest in it and I remember back when Countrywide failed and their was a person in Bank of America that was bragging how they could make Billions on Countryside's failure. Then came the multi billion dollar bail out and Obama pleaded with the Banks to help the home owners. Ya Right! Bank of America sent me a 9.5% modification with the miss payments added to the back of my underwater mortgage. Oh what Bank of America did not know is that I have Guardian Angles that watch over me. All I have to do is ask and I shall receive. Sorry ... Bank of America, Allstate has open the door and Wikileaks is going to slam it in your A$$. To those who have interest in Bank of America ... I would pull my money out of that Bank as fast as I could. I am not joking about my Guardian Angles either!!!

December 29 2010 at 12:59 AM Report abuse rate up rate down Reply
Hi RON

Allstate should be going after Morzello --- they are just spending legal funds stupidly by chasing after BOA !! Wonder who in Allstate authorized this lawsuit....... odd

December 28 2010 at 7:05 PM Report abuse +1 rate up rate down Reply