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“Allstate alleges that between March 2005 and June 2007, as it was buying the securities, Countrywide “abandoned its underwriting standards, misrepresented crucial information about the underlying mortgage loans and concealed material facts” from the insurer, it said in a statement.”

EDITOR’S COMMENT: If the note does not describe the terms of the transaction, then it cannot be used as evidence of the obligation. If the mortgage instrument states that it secures the obligation described in the note and the note describes a non-existent agreement, the obligation is unsecured. The Lenders here clearly intended a different use of their money than what was executed by their agents. The borrowers clearly relied on the same misinformation that was given to the investors.

Thus there was no actual agreement between the lender and borrower. Hence the obligation is in equity, the claim for which belongs to the investors. The investors have chosen to seek relief against the agents because they do not want to adopt the deceptive lending practices of the agents who were acting outside the scope of their authority as clearly set forth in the prospectus and securitization documentation, none of which was disclosed to the borrowers. The agents, not content to have stolen the money of the investors, now seek to steal the equitable claim of the investors as well. AND the attorneys of these agents have successfully confused the courts as to the status and orientation of the parties.

In the end the bogus mortgage bonds were worthless and empty, and in the end the obligations of the borrowers are unsecured and subject to offset for damages in tort and contract.

This one will probably cause BOA to push CW into the ditch and seek bankruptcy protection from creditors. But it also signals again the unwillingness of the Lenders (i.e., the people who advanced the funds that were subsequently used to fund loans that were fraudulently documented as notes and mortgages) to accept the authenticity of the loans, notes, obligations or mortgages. They are saying in simple language “That is not what we gave you the money for.”And they are saying “this is not what you said it would be.”

THAT is why investors are not going after homeowners and that is why investors are stepping back from the entire foreclosure fracas. If they thought they could recover more money by going after the enforcement of the loans against homeowners or borrowers, they would do it. But they don’t think that at all. Why not? Because the mortgages, the notes, the obligations are all unenforceable or nearly so. And because the documentation of the so-called “Trust” makes it difficult for them to control the servicers who are bleeding the last ounce of money out of this mess.

Investors, the source of the cash, the only people who could be called lenders, don’t want any part of the “trustees” or servicers or anyone but the investment banks and the intermediary aggregators working with the the investment banks because those are the people who really knew what they were doing to both sides of the transaction.

So the investors are all saying the same thing: these mortgages were not originated using industry standard underwriting guidelines and rules. These mortgages were not what was described in the prospectus to investors nor the pooling and services agreement. They are saying that disclosure was both intentionally misleading and lacking essential facts that would have negated Allstate’s willingness to advance hundreds of millions of dollars by the purchase of what turned out to be bogus mortgage bonds.

Thus the investors are saying what you sold us was worthless or worth less than what was represented — exactly what we have been saying here for borrowers. The loans were and are worthless, unenforceable and the loan principal was never exceeded by the true value of the property. That is appraisal fraud, it was ratings fraud, and those are one and the same thing. That is why investors and borrowers should be coming at these perpetrators from both ends so that they are revealed as the intermediaries who stole from both sides and then ran out the back door taking another giant helping of money from the U.S. taxpayers.

Hence the conclusion that the trustees are not acting in the interests of the the investors because either there isn’t or never was any trust or because the real show isn’t being run by the trustees at all. The defendants in both the investor and the borrower lawsuits should be the the underwriters from Wall Street and the aggregators like Countrywide. Investors got the message. Now it’s time for the borrowers.

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Allstate Sues Countrywide Over Mortgage-Backed Securities

NU Online News Service, Dec. 29, 12:20 p.m. EST

Allstate Insurance Co. filed a federal lawsuit against Countrywide Financial Corp., seeking damages related to its purchases of more than $700 million in mortgage-backed securities from the company, now owned by Bank of America.

Allstate alleges that between March 2005 and June 2007, as it was buying the securities, Countrywide “abandoned its underwriting standards, misrepresented crucial information about the underlying mortgage loans and concealed material facts” from the insurer, it said in a statement.

The lawsuit filed in the Southern District of New York in Manhattan names Bank of America and Angelo Mozilo as defendants. Mr. Mozilo is Countrywide’s co-founder and was its chief executive officer. Other former officers, directors and executives are also named as defendants.

Allstate was not specific in the damages it seeks but said, at minimum, it wants to rescind the securities and recover losses as well as attorneys’ fees and costs.

The Northbrook, Ill.-based insurer said Countrywide began its destructive practices in 2003. Allstate said its suit is based on an analysis of mortgages underlying the securities, Countrywide documents made public by an U.S. Securities and Exchange Commission lawsuit and other complaints against Countrywide.

In September, Ambac filed suit against Bank of America over the lending practices of Countrywide. Ambac, which wrote financial guarantee insurance policies for Countrywide, said it identified about 6,360 loans with an aggregate principal balance of $658 million that violated the company’s guidelines.

Ambac is looking for reimbursement of claims payments.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: allstate, Bank of America, BOA, countrywide |