Allstate Sues Bank Of America Over Bad Countrywide Mortgages

Think Bank of America is regretting the day it decided to salvage Countrywide? The acrid aftertaste of that acquisition just got a little worse with the news that Allstate Corp has sued BofA and 18 other defendants, alleging losses on more than $700 million of mortgage securities Allstate purchased from Countrywide.

From Reuters:

Allstate said that starting in 2003, Countrywide quietly decided to boost market share by approving any mortgage product that a competitor was willing to offer, in a “proverbial race to the bottom.” It said Countrywide then passed on the added risks to investors who bought debt backed by the mortgages.

“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,” reads part of the 150-page complaint filed Monday.

Included in the list of defendants is former Countrywide CEO, oddly orange-tinted bastard Angelo R. Mozilo.

Allstate seeks to rescind its purchases of the securities, as well as unspecified damages.

Allstate sues BofA, Mozilo over Countrywide losses [Reuters]

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  1. WiglyWorm must cease and decist says:

    I know a few home owners who would like to “rescind their purchase” as well. Surely there will be a program set up for them?

  2. Ocyrus says:

    I’m wondering if homeowners in high-foreclosure areas can sue for the loss of their property values due to the fradulent mortgages being handed out by these shady financial institutions.

    • qwickone says:

      good luck following that trail of evidence. Think about companies that dump chemicals into water supplies. All the residents that get sick know it’s the company’s fault, but somehow by the time it gets to a trial, the company makes it look like you made yourself sick. Think it’s going to be any different here?

      • Ocyrus says:

        Well, what can’t be solved at the ballot box, or in the jury box, can only ever be solved with a box of bullets.
        When the self-appointed rulers of our world wake up to find mobs at their doorsteps, they’ll cave.

        • Im Just Saying says:

          Seeing as very little of a mob can be moved to vote, I doubt anyone’s afraid of a muderous coup.

          • Ocyrus says:

            Coup implies legitimacy of power, not the reality of the corruption state.

          • Skyhawk says:

            That would be sad, only if voting ever changed anything.
            Thus far, it hasn’t done anything other than switching between the two political corporations.

  3. dadelus says:

    Wow!!! BoA is really going for the Golden Poo Lifetime Achievement award.

    • nbs2 says:

      ?

      There is quite a bit I blame BoA for, obviously. My troubles with them didn’t rise to the levels of others, but I have trouble seeing how the actions of pre-acquisition CW can be imputed to BoA as far as Poo-worthiness can be determined. If they engaged in these activities afterward the sale or allowed them to continue, they are just as culpable as others, but no more Poo-worthy than any other.

  4. Kate says:

    About time.

  5. ARP says:

    Now that they’re eating their own, things might get interesting. Of course, the ones who got hurt the most will never see a dime.

  6. evilpete says:

    If Allstate is successful, it will open the door to a whole avalanche of law suits.

    Anyone know what the statute of limitations is ?

    • ARP says:

      I can’t tell from the article, but I’d imagine it would be misrepresentation/fraud (maybe breach of contract as well). States vary in both the statute of limitations and the statutes of repose, but they’re usually 2-5 years, with statutes of repose being a bit longer.

    • hansolo247 says:

      Who cares, Obama and Bernanke will provide all of the interest free loans BoA needs to pay for anything.

      It’s not like BoA is a healthy institution; they’re on fumes even now.

  7. Madman says:

    Frickin’ caveat emptor, Allstate. If you weren’t greedy and lazy as well you would have done your own due diligence instead of investing in things you have no clude about. this doesn’t excuse BoA, but the suit lacks merit.

    • c!tizen says:

      If CW falsified numbers and ignored underwriting guidelines meant to keep itself from processing bad loans, how is that Allstate’s fault? At the time CW was a well respected financial institution, not some broke low-life dodging child support.

      That’s like blaming those people who had brake failures on their Honda for not reviewing the algorithm that the on board computer used to calculate braking. This has all kinds of merit, and if it helps get the people who contributed to this mess in more hot water, I’m all for it.

    • Fred Garvin says:

      Buyer beware? What you’re saying is that companies selling something should be allowed to lie and cheat without negative consequences.

    • CharlesFarley says:

      “Frickin’ caveat emptor, Allstate. If you weren’t greedy and lazy as well you would have done your own due diligence instead of investing in things you have no clude about. “

      Too bad it doesn’t work like that. The rating agencies (Moody’s, S&P, Fitch, etc…) rated the bonds such that the representation of the quality of the bonds were such that they fit within the investment profile of the purchaser. The rating agencies, auditors and underwriters, IMHO, have a huge piece of the responsibility pie in addition to the bank leadership.

      One of the rating agencies has a case is in front of the SCOTUS over all of this.

  8. nbs2 says:

    I can’t prove that they continued to engage in these activities after the buy, but I wouldn’t be surprised. Our broker gave us a very good deal a couple years ago by giving us a deal at cost – one that shouldn’t have been matchable by CW. CW still offered to match the offering. I don’t know how they could have afforded to do so.

    We weren’t in the group that couldn’t afford the property (dual income, self-limited loan value to single income), but something still didn’t smell right.

    • BurtReynolds says:

      The key phrase there is that you limited yourself to what you knew you could afford. A lot of people are crying about shady old Countrywide when it took two parties to execute that mortgage. I am sorry, but if you couldn’t figure out that a loan based on an exaggerated income, interest only ARM, piggy back loan for a downpayment (with balloon due in 5 years), or any other scheme to get you into the house wasn’t in your best interest, then the purchaser shares just as much blame. Any “they told me the value would keep going up and I could refinance” is pure speculation and should have been recognized as such. You might as well sue CNBC for having a show that told you GOOG was good for another 10% and then fails to get there.

      Now, if people were actually lied to about terms of the deal (thought they were getting a fixed rate, but didn’t), then they have a legitimate complaint. Failing to do your own due diligence (and basic math) about what you could or couldn’t afford doesn’t mean Countrywide is evil. It means you were too eager to buy a home to educate yourself about what you were getting into.

  9. FrankReality says:

    As much as I dislike Allstate, I hope this sets off an avalanche of similar law suits against BoA and the other Big Five banks.

    Since the Federal Reserve and the Office of the Comptroller of the Currency (OCC) are in the pocket of the megabanks, there is nobody enforcing the law – lawsuits like this are the only way to force the issue of systemic fraud – in marketing mortgages, in failure to record mortgages, in falsifying affidavits and in defrauding buyers of mortage pools by misrepresenting the risk of the pool.

    We’re going to find out if the rule of law applies to the megabanks. Maybe “too big to fail” isn’t true.