Citigroup, Deutsche Bank Latest To Be Sued By Allstate Over MBS

NU Online News Service, Feb. 23, 12:52 p.m. EST

Allstate Corp. has filed another lawsuit related to mortgage-backed securities in an attempt to get back what the insurer thinks it is owed.

Citigroup and Deutsche Bank are now targeted by Allstate. The lawsuit filed Feb. 17 in New York alleges the banks violated state fraud and misrepresentation laws as well as federal securities laws. The banks omitted information or gave untrue statements about the quality of the mortgages, Allstate said.

In a statement, the Northbrook, Ill.-based insurer said that between 2005 and 2008 it bought more than $200 million in mortgage-backed securities from Citigroup’s Citimortgage Inc., and during the same time Allstate purchased about $185 million of the securities from defendants Ace Securities Corporation and Deutsche Bank Securities Inc.

Allstate has filed similar lawsuits against J.P. Morgan Chase & Co. and Bank of America’s Countrywide Financial Corp. Allstate said it bought a combined $1.45 billion in mortgage-backed securities from these banks.

In each suit, Allstate seeks damages including rescission, monetary losses, attorneys’ fees and costs, and prejudgment interest, the insurer said.

Last month, Gerald Silk, a partner for Bernstein Litowitz in New York, predicted an uptick in litigation related to residential mortgage-backed securities, and he pointed to Allstate as a prime example.

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