Allstate Corp. has sued Bank of America Corp. and eighteen other defendants including several former Countrywide officials and ex-CEO Angelo Mozillo. In a complaint filed Monday in Manhattan federal court, Allstate, alleged that Countrywide misled it into believing the mortgage-backed securities it bought were safe. According to the complaint, "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."Allstate stated that it suffered on more than $700 million of mortgage debt that it bought from Countrywide Financial Corp. now owned by Bank of America. Allstate “seeks unspecified damages, alleges fraud, negligent misrepresentation and violation of U.S. securities laws."Now, how does Allstate know that Countrywide Corp. misled the company? Allstate used sampling to confirm that Countrywide lied to Allstate when the selling mortgages.
Via ZeroHedge:
According to the complaint, Allstate determined that Countrywide now owned by Bank of America misrepresented virtually everything in its prospectuses: from the percentage of owner-occupied properties reped in prospectuses (about a 10% differential) to the loan-to-value (LTV) thresholds on represented loans (both at the 90% and 100% threshold) while in between finding willful intent to defraud and deceive Allstate.
This latest bombshell lawsuit against Bank of America gives certainly the green light for anyone who believes that the banks or its predecessor was dishonest in representing any and all deal components, and wishes to do so by using statistical sampling to prove his or her case. This is certainly bad news for banks that inherited its predecessor or predecessor's toxic mortgages. Read entire Allstate complaint.
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