Bank of America Corp.'s Countrywide unit and insurer Allstate Corp. settled a 2010 lawsuit over $700 million in devalued mortgage-backed securities. Terms of the accord weren’t revealed.
Lawyers for the companies asked U.S. District Judge Mariana Pfaelzer in Los Angeles today to dismiss the case. Two years ago, she ruled that Allstate couldn't hold Bank of America liable as the parent company of the mortgage lender it acquired in 2008.
Bank of America is resolving a series of lawsuits against Countrywide, the largest U.S. home-lender in the run-up to the housing market collapse and 2008 financial crisis. The unit was accused of extending mortgages to unqualified borrowers and misleading investors as to the health of securities they backed.
Bank of America last month agreed to a $9.5 billion settlement with the Federal Housing Finance Agency, the conservator of Fannie Mae and Freddie Mac, which had bought $26.6 billion in mortgage-backed securities that Countrywide sold between 2005 and 2008.
B of A's Countrywide unit last year settled a class-action, or group, lawsuit by investors who said the lender duped them into buying $500 million worth of the securities. In a separate $8.5 billion settlement, the Charlotte-based bank resolved investor claims it failed to buy back delinquent mortgages packaged in the securities.
Marc Raybin, a spokesman for Northbrook, Ill.-based Allstate, declined to comment on the terms of the accord.
"The parties have resolved the litigation on mutually agreeable terms," Raybin said in an emailed statement.
Lawrence Grayson, a spokesman for Bank of America, declined to comment on the Allstate settlement.
Bank of America rose 6 cents to $16.44 in New York, Allstate rose 14 cents to $55.89.
Allstate sued Bank of America and Countrywide in federal court in New York in December 2010, after Pfaelzer had trimmed the main class-action case against Countrywide to a narrow group of securities that had been part of the very first investor lawsuits over the downgraded securities and that didn't include Allstate’s investments.
A federal judge in New York in June 2011 sent the litigation to Los Angeles, where Pfaelzer has been handling consolidated Countrywide securities cases since 2007. In 2011, Pfaelzer dismissed Allstate's federal securities claims, saying they had been filed too late.
The judge had allowed Allstate to pursue state-law claims that allege Countrywide committed fraud by not telling investors mortgages packaged in the securities didn't meet the home lender's underwriting standards.
Countrywide, based in Calabasas, Calif., was the biggest U.S. residential lender, originating or purchasing about $1.4 trillion in mortgages from 2005 to 2007. The bulk of them were sold to investors as mortgage-backed securities.