Allstate sues banks over fraudulent sales of mortgage-backed securities

Home insurer Allstate has sued Bank of America’s Merrill Lynch unit over claims it fraudulently sold the insurer about $167 million of residential mortgage-backed securities, Crain’s reported. In a complaint filed yesterday in New York Supreme Court, Allstate asked for damages, including the lost market value of the securities and principal and interest payments. “Because of the systemic abandonment of underwriting standards and the resulting inclusion of toxic, highly risky mortgage loans to back the certificates, most of Allstate’s certificates have been downgraded from the highest possible ratings to junk-bond ratings,” Allstate said in the complaint. Allstate filed a similar lawsuit against Credit Suisse Monday over more than $231 million of the securities. Allstate, based in Northbrook, Ill., has sued a string of other banks for similar claims. Last month, it sued JPMorgan Chase over $700 million of mortgage-backed securities the bank sold the insurer; Citigroup over more than $200 million; and Deutsche Bank over about $185 million. Allstate said the banks misrepresented underwriting standards, owner occupancy data and loan-to-value ratios. [Crain’s]