ALLSTATE FOLLOWS MBIA AND UNITED GUARANTY IN SUING COUNTRYWIDE

Illinois-based insurer Allstate has followed AIG unit United Guaranty and bond insurer MBIA in suing Countrywide Financial, a subsidiary of Bank of America since July 2008, for allegedly misrepresenting the risks entailed with mortgage securities old by Countrywide. Allstate alleges that it suffered significant losses on the $700m of mortgage securities sold by Countrywide. Allstate claims that it had been assured that the securities were safe and that the quality of the home loans backing the securities was high. Allstate has also named ex-Countrywide CEO Angelo Mozilo as a defendant. In the suit Allstate claims that Countrywide took advantage of the easy credit years from 2003 on with a deliberate policy to increase market share, ignoring its own underwriting standards and then packaging up loans "highly likely to default" into securities sold on to the likes of Allstate between 2005 and 2007. Bank of America currently faces lawsuits related to $54bn of such debt. BofA spokesman Bill Halldin told Bloomberg that "this unfortunately appears to be a situation where a sophisticated investor is looking for someone to blame for a downturn in the economy and losses on an investment it made". A lawyer representing Mr Mozilo said that that the only basis to name Mr Mozilo was "to try to capture publicity".