Allstate files suit against BofA over mortgage debts

08:28, December 30, 2010      

Email | Print | Subscribe | Comments | Forum 

Allstate Corp has sued Bank of America Corp, its Countrywide lending unit and 17 other defendants for allegedly misrepresenting the risks on more than US$700 million of mortgage securities it bought from Countrywide.

Allstate, the largest publicly traded home and auto insurer in the United States, alleged it suffered "significant losses" after Countrywide misled it into believing the securities were safe, and the quality of home loans backing them was high.

The lawsuit also names several former Countrywide officials as defendants, including longtime Chief Executive Angelo Mozilo. Countrywide was the largest US mortgage lender before Bank of America bought it in July 2008.

Allstate said that starting in 2003, Countrywide quietly decided to boost market share and ignore its own underwriting standards by approving any mortgage product that a competitor was willing to offer, in a "proverbial race to the bottom."

Countrywide then passed on the added risks to investors who bought debt backed by the mortgages, Allstate said.

"Defendants knew the loans offloaded onto Allstate were a toxic mix of loans given to borrowers that could not afford the properties, and thus were highly likely to default," said the 150-page complaint filed on Monday in Manhattan federal court in New York.

Allstate seeks to undo its securities purchases, which took place between 2005 and 2007, plus unspecified damages.

The Northbrook, Illinois-based company joined Charles Schwab Corp, the Federal Home Loan Banks and others in suing lenders for allegedly misleading them about mortgage securities.

Bank of America, the largest US bank by assets, last month said it faced lawsuits over US$54 billion of such debt.

Mozilo agreed in October to a US$67.5 million settlement of a US Securities and Exchange Commission civil fraud lawsuit.

The SEC accused Mozilo of misleading investors about Countrywide's health and risk-taking, and generating roughly US$140 million of improper gains from insider stock sales. Mozilo did not admit wrongdoing in agreeing to the SEC accord.

Source: Shanghai Daily
  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • Focus On China
  • Shanghai World Expo 2010
Major headlines
Editor's Pick
  • World's longest wind, rain-proof fengyu qiao
  • Highspeed railway linking S. China cities sets off maiden voyage
  • Reopened China Pavilion attracts waves of visitors
  • Commodity sales pick up as traditional festival draws near
  • Birmingham City ties Manchester United 1-1
  • Moat in E. China's Jinan opens to navigation
Hot Forum Dicussion