The Real Estate Bloggers

Countrywide Sued By AllState For 700 Million – A Bigger Story Than You Might Think

Posted: 29 Dec 2010 07:47 AM PST

Mozilo “The 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,”

Thus starts a $700 million lawsuit filed by Allstate against Bank of America, Countrywide, and Angelo Mozilo and other officers of the former Countrywide Financial.

This is going to be interesting on two fronts.

First, if this lawsuit gains traction, the door for corporations, pension funds, and unions that have bought up the mortgage debt that was misrepresented could be opened up to the attorneys. The feeding frenzy that is going to be going on could be epic and devastating to the lending institutions that packaged up the bad debt and sold it as quality products.

Second, there is a great chance that Angelo Mozilo is going to be crushed by this lawsuit. The former Countrywide CEO thought he had survived the legal troubles that from his actions in the meltdown of his company. He is now living the life of Riley thinking all his troubles were behind him. Now he may be the target of the 3 piece suited sharks.

We have watched the corruption of the real estate and lending industry over the past decade. Now that the truth is out the big dogs are coming to get their revenge. So what that 3 million families will have their credit destroyed and their futures imperiled. They were not able to go after the big boys like Countrywide and Bank of America.

But these same companies took advantage of even bigger targets, the huge pension funds and insurance companies. As we see with Allstate, they have the attorneys and money to fight the battles the little guys have to walk away from.

This should be very interesting to watch. Get your popcorn.

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Countrywide Sued By AllState For 700 Million – A Bigger Story Than You Might Think