NU Online News Service, Feb. 18, 8:56 a.m.EST

Allstate Corp. has filed a lawsuit against J.P. Morgan Chase& Co. over more than $750 million in mortgage-backed securitiespurchased from the banks.

The suit, filed in New York State Supreme Court in Manhattan,alleges the bank violated state fraud and negligentmisrepresentation laws, as well as federal securities laws,Allstate said, charging that J.P. Morgan misrepresented the qualityof the mortgages.

The suit is similar to one Allstate filed in January against Countrywide FinancialCorp., now owned by Bank of America. It seeks damages relatedto purchases of more than $700 million in mortgage-backedsecurities.

The latest lawsuit includes Bear Stearns, Washington Mutual andother affiliates as defendants, Allstate said.

The banks misled the insurer with “untrue statements” andomissions of material facts about the securities, purchased between2005 and 2008, Allstate said. The total purchase price of thesecurities was $757.5 million.

Allstate seeks damages including rescission, monetary losses,attorneys’ fees and costs and prejudgment interest, the insurersaid.

Last month, Gerald Silk, a partner for Bernstein Litowitz in NewYork, predicted an uptick in litigation related toresidential mortgage backed securities, and he pointed to Allstateas a prime example. “I think you’re going to see more RMBSlitigation now as we’re coming up on statutes of limitations,depending on the claims and the state,” Mr. Silk said at the time.“More and more and more RMBS litigation will unfold, and Allstateis a good example of that,” he noted, referring to Allstate’slitigation against Countrywide.

Last September, Ambac filed suit against Bank of America over thelending practices of Countrywide. Ambac, which wrote financialguaranty insurance policies for Countrywide, said it identifiedabout 6,360 loans with an aggregate principal balance of $658million that violated the company's guidelines.