The Countrywide unit of Bank of America has settled a four-year old legal action with Illinois-bsaed Allstate that related to the insurer's investment in collateralised mortgage obligations (CMO) prior to the global financial crisis and US housing price collapse in 2008/09.
Bank of America is attempting to bring closure to a series of legal actions brought against it as a result of actions at Countrywide, the US homelender that was bought by BofA in 2008. Countrywide was accused of unsound lending decisions during the housing bubble up to 2007, while at the same time misleading investors as to the solidity of the derivative securites packaged together from Countrywide's loans.
Allstate began its $700m suit in December 2010 in a federal court in New York after US District Judge Mariana Pfaelzer narrowed down a class-action case by investors to a section of CMOs that did not include Allstate's investments. BofA settled that class action last year.
The terms of the agreement were not disclosed, although both parties have waived their right to appeal.