Allstate is suing Bank of America and its Countrywide Financial division over Countrywide's sale of $700 million in mortgage-backed securities to the insurance giant, alleging that Countrywide knew in advance that the assets would drop in value because of a high percentage of defaults.
Bank of America challenges testimony by one of its operational leaders -- that Countrywide may have held on to homeowners' notes that it should have put into a trust. But the testimony is reinforcing fears that BofA is in big trouble.
Firms are again starting to offer mortgage-backed securities, the same investments that led to the financial crisis. The latest ones, proponents say, focus on high-end mortgages instead of sub-prime loans, but skeptics worry there still aren't enough new safeguards in place.