Allstate Sues BofA over Countrywide Losses

By Chuck Sudo in News on Dec 29, 2010 3:15PM

The mortgage securities crisis that nearly brought down the economy didn't just hurt homeowners. Allstate filed a lawsuit against Bank of America and 17 other defendants over understating the risks on more than $700 million in toxic mortgages it bought from Countrywide Financial. Bank of America bought Countrywide in 2008.

In the suit, Allstate alleges that Countrywide ignored its own underwriting standards and approved mortgages in order to increase its market share, then passed on the added risks to financial backers who bought debt backed by the mortgages. Allstate is seeking to undo its securities purchases between 2005 and 2007, as well as sue for unspecified damages.

Allstate, based in suburban Northbrook, is the largest publicly traded auto and home insurer in the country. Allstate joins Charles Schwab and other companies in suing banks for allegedly misleading them about the toxic mortgage securities. Bank of America is facing lawsuits based on $54 billion in such debt.