Allstate queues up at the BofA trough

Bank of America has not yet seen the bottom of the hole that it dug itself when it purchased Countrywide. A report today add Allstate insureance to the growing list of companies that have sued BofA for the fraud perpetrated on them by the RMBS’ sold to them by Countrywide.

Nasdaq reports:

Insurance company Allstate Corp. sued mortgage- originator Countrywide Financial Corp., now a part of Bank of America Corp., over $700 million in residential mortgage-backed securities that the insurer had invested in.The suit also names Countrywide executives as defendants, including Chairman and Chief Executive Angelo Mozilo, who agreed in October to pay $67.5 million in penalties to settle civil fraud and insider-trading charges from the housing crisis.

Allstate’s suit, filed Monday in Manhattan federal court, contains similar allegations other investors have raised with mortgage creators, namely that lax underwriting standards are to blame for the collapse of the investment vehicles.

David Dayen over at Firedoglake also commented on this and pointed me to this succinct statement of the likely consequences from Matt Taibbi (the quote is actually pretty far down in his Mailbag responses…):

I’d bet just about anything that one or more of the big banks — Bank of America, Chase, Wells Fargo, etc. — will be ruined or near-ruined by class-action lawsuits brought either by foreclosure plaintiffs or by MBS investors (there are a number of these lawsuits in the pipe now). The first ruling that declares one of these banks liable for the losses suffered by investors who bought these banks’ fraudulently-packaged mortgage-backed securities is going to send shock waves through the industry.

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