Allstate Corp. has sued Bank of America Corp. and the Countrywide Financial mortgage unit it acquired in 2008 regarding $700 million in residential mortgage-backed securities the insurer purchased, claiming Countrywide misrepresented the investments, Bloomberg News reported Tuesday.
“Countrywide was singularly focused on increasing its market share, off-loading the risk onto Allstate and other institutional investors that purchased securities backed by pools of Countrywide’s mortgages,” Allstate said in its civil suit, filed Monday in U.S. District Court in Manhattan.
Allstate, of Northbrook, said in its filing that the investments in collateralized debt obligations, or CDOs, suffered “drastic and rapid loss in value” as a result of the poor quality of the loans underlying them.
In addition to Bank of America and Countrywide, the suit names as defendants former Countrywide officials including one-time Chairman and Chief Executive Angelo Mozilo. The suit seeks unspecified damages.
Yes, I am sure countrywide mis-represented these mortgages however allstate should have done their due diligence. The decision to invest a large amount of money without in-depth research is just plain irresponsible. The stockholders of Allstate should replace all involved in the decision to make this investment. The real tragedy are the citizens
whom lost their homes and ruined their credit. I dont feel a bit sorry for the fat cat executives of either company. My only hope is that future financial managers understand the un-ethical and immoral behaviors of the countries financial industry are wrong.
Allstate consciously chose to chase higher returns by investing in mortgage-backed securities. They also consciously chose not to learn more about what they were buying other than the ratings and what the MBS sellers offered. Those who did – read books like The Big Short to see that it was possible – identified the problems with these securities and made the right decisions. This lawsuit is nothing more than Allstate management trying to pass the buck on their own poor decision.