Allstate, Merrill Lynch to End $167 Million Mortgage SuitChris Dolmetsch
Allstate Corp. and Bank of America Corp.’s Merrill Lynch unit agreed to end a lawsuit by the insurer over $167 million in mortgage-backed securities as the second-largest U.S. lender continues to resolve litigation tied to the financial crisis.
The parties agreed to end the suit, filed in New York State Supreme Court in Manhattan in March 2011, according to a court filing dated yesterday. Terms weren’t revealed. Allstate, based in Northbrook, Illinois, accused Merrill Lynch of selling it mortgage bonds that were riskier than promised.
Bank of America Chief Executive Officer Brian T. Moynihan has spent more than $50 billion to clean up fallout from the 2008 credit crisis when his predecessor, Kenneth Lewis, bought Countrywide Financial Corp. and Merrill Lynch & Co.
The parties resolved the matter on mutually agreeable terms, Daniel L. Brockett, an attorney with Quinn Emanuel Urquhart & Sullivan LLP in New York representing Allstate, said by telephone. Lawrence Grayson, a spokesman for Bank of America, declined to comment on the agreement.
Bank of America, based in Charlotte, North Carolina, agreed to settle a separate 2010 case filed by Allstate against its Countrywide unit over $700 million in devalued mortgage-backed securities, according to a filing yesterday in U.S. District Court in Los Angeles.
Allstate also sued Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley in New York state court in 2011 over mortgage-backed securities. The insurer settled with Citigroup in May and last year dropped the cases against Deutsche Bank and Goldman Sachs.
Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.
The case is Allstate Insurance Co. v. Merrill Lynch & Co., 650559-2011, New York State Supreme Court, New York County (Manhattan).