NU Online News Service, Dec. 29, 12:20 p.m. EST
Allstate Insurance Co. filed a federal lawsuit against Countrywide Financial Corp., seeking damages related to its purchases of more than $700 million in mortgage-backed securities from the company, now owned by Bank of America.
Allstate alleges that between March 2005 and June 2007, as it was buying the securities, Countrywide "abandoned its underwriting standards, misrepresented crucial information about the underlying mortgage loans and concealed material facts" from the insurer, it said in a statement.
The lawsuit filed in the Southern District of New York in Manhattan names Bank of America and Angelo Mozilo as defendants. Mr. Mozilo is Countrywide's co-founder and was its chief executive officer. Other former officers, directors and executives are also named as defendants.
Allstate was not specific in the damages it seeks but said, at minimum, it wants to rescind the securities and recover losses as well as attorneys' fees and costs.
The Northbrook, Ill.-based insurer said Countrywide began its destructive practices in 2003. Allstate said its suit is based on an analysis of mortgages underlying the securities, Countrywide documents made public by an U.S. Securities and Exchange Commission lawsuit and other complaints against Countrywide.
In September, Ambac filed suit against Bank of America over the lending practices of Countrywide. Ambac, which wrote financial guarantee insurance policies for Countrywide, said it identified about 6,360 loans with an aggregate principal balance of $658 million that violated the company's guidelines.
Ambac is looking for reimbursement of claims payments.
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