Allstate (ALL) Sues Bank of America (BAC) and its Countrywide Financial Unit for Losses of $700 Million in MBS
Bank of America and Countrywide have been sued with multiple other defendants by Allstate Corporation for alleged losses of more than $700 million in mortgage backed securities (MBS), according to a Bloomberg News report. Allstate is the largest publicly traded U.S. home and auto insurer based out of Northbrook, IL. It began investing in mortgage backed securities believing that they were safe and that the quality of the loans backing the securities was high. According to the allegations, Allstate is complaining that Countrywide began in 2003 to boost their market share by approving any mortgage product offered and then passing the increased risks of default in the lower tranches on to ill advised investors. Long time Chief Executive of Countrywide, Angelo Mozilo is a named defendant, who Allstate says knew of the toxic mix of loans given to borrowers that could not afford the properties and were highly likely to default. As it turns out, Countrywide’s mortgages were some of the worst issued during the crisis and Bank of America has been dealing with growing loan losses since taking them over in 2008. In November, Bank of America was facing up to $31 billion in lawsuits over the mortgage backed securities (MBS), according to the Wall Street Journal. The case is filed as No. 10-09591; Allstate Insurance Company et al v. Countrywide Financial Corporation et al, in the U.S. District Court, Southern District of New York.
Angelo Mozilo agreed in 2010 to a $67.5 million settlement with the SEC for misleading investors about the health of Countrywide, their risky ventures and a litany of other wrongdoings associated with the nation’s housing collapse.
As reported earlier, Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JP Morgan Chase (JPM) and Wells Fargo (WFC) are all presently facing subpoenas by the SEC as the regulator examines how mortgages were packaged, marketed and sold to investors.
If you have suffered losses from investing in mortgage backed securities (MBS), please contact our securities law firm at 1-800-259-9010 for a confidential, no obligation consultation.