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Allstate, BofA agree to end toxic mortgage lawsuit

An Allstate insurance office is shown in San Francisco, California February 10, 2010. REUTERS/Robert Galbraith
An Allstate insurance office is shown in San Francisco, California February 10, 2010. REUTERS/Robert Galbraith

By Bernard Vaughan

NEW YORK (Reuters) - Allstate Corp and Bank of America Corp's Countrywide unit have agreed to dismiss a lawsuit stemming from $700 million of toxic mortgage debt, according to a court filing on Tuesday.

The parties "have agreed to dismissal of this action in its entirety," lawyers for Allstate and Countrywide said in a document filed in U.S. District Court for the Central District of California.

The parties also waived any right to appeal, according to the document.

Terms of the agreement were unclear.

"The parties have agreed to resolve the matter on mutually agreeable terms," Daniel Brockett, a lawyer for Allstate, said in a telephone call Tuesday night.

Representatives for Allstate and BofA declined to comment.

In 2011, a U.S. District Judge Mariana Pfaelzer in Los Angeles narrowed the lawsuit when she tossed federal securities law claims Allstate had brought against mortgage lender Countrywide over the debt, saying Allstate waited too long to sue. She also dismissed Bank of America, which acquired Countrywide in 2008, as a defendant.

However, Pfaelzer let Allstate pursue state law claims accusing Countrywide of failing to tell investors that loans underlying its mortgage securities did not comply with its own underwriting standards.

The case is Allstate Insurance Co et al v. Countrywide Financial Corp et al, U.S. District Court, Central District of California, No. 11-05236.

(Reporting by Bernard Vaughan; additional Reporting by Karen Freifeld.)

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