$700M of MBSs Go South, Allstate (ALL) Seeks Out BofA, Countrywide for Defrayal
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Allstate (NYSE: ALL) is suing Countrywide, Bank of America (NYSE: BAC) and others for more than $700 million in losses incurred resulting from the purchases of residential mortgage-backed securities bought from Countrywide, claiming that Countrywide misrepresented the investments.
According to the complaint, Allstate alleges that Countrywide knew that the securities sold to Allstate were toxic, backed by "borrowers who could not afford the properties and thus likely to default."
The securities were bought between March 2005 and June 2007. Allstate claims that those securities suffered "drastic and rapid loss in value" when waves of homeowners began to default on their mortgages.
Among the defendants are several former Countrywide officials, including long-time CEO Angelo Mozilo.
Earlier this year, Mozilo agreed to a $67.5 million settlement with the U.S. Securities and Exchange Commission for misleading investors about Countrywide's health and risk taking. The fraud resulted in $140 million in gains from insider stock sales.
The case is Allstate Insurance Co. vs. Countrywide Financial Corp., 10-cv-9591, U.S. District Court, Southern District of New York (Manhattan).
Shares of BofA are 0.8% higher this afternoon, and Allstate is down 0.28%.
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According to the complaint, Allstate alleges that Countrywide knew that the securities sold to Allstate were toxic, backed by "borrowers who could not afford the properties and thus likely to default."
The securities were bought between March 2005 and June 2007. Allstate claims that those securities suffered "drastic and rapid loss in value" when waves of homeowners began to default on their mortgages.
Among the defendants are several former Countrywide officials, including long-time CEO Angelo Mozilo.
Earlier this year, Mozilo agreed to a $67.5 million settlement with the U.S. Securities and Exchange Commission for misleading investors about Countrywide's health and risk taking. The fraud resulted in $140 million in gains from insider stock sales.
The case is Allstate Insurance Co. vs. Countrywide Financial Corp., 10-cv-9591, U.S. District Court, Southern District of New York (Manhattan).
Shares of BofA are 0.8% higher this afternoon, and Allstate is down 0.28%.
Get immediate access to market moving news and alerts with StreetInsider.com Premium - FREE TRIAL!
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