NEW YORK – Allstate Corp. has filed a federal lawsuit against Countrywide Financial Corp. over $700 million in toxic mortgage-backed securities that the insurer bought beginning in 2005, only to see their value decline rapidly.

The suit, filed Monday in Manhattan federal court, targets Countrywide, its co-founder and longtime CEO Angelo Mozilo and other executives, and Bank of America Corp., which bought the mortgage giant in 2008.

Allstate maintains that beginning in 2003, Countrywide abandoned its underwriting standards and misrepresented crucial information about the underlying mortgage loans that made up the securities it sold. The company presented securities backed by the mortgages as safe investments by concealing material facts, the suit alleges.

Allstate bought the mortgage-backed securities in question from Countrywide from March 2005 to June 2007.

Allstate did not specify damages in the suit but said it seeks, at minimum, to reverse the securities purchases and recover its losses. The insurer posted a loss of $1.68 billion for 2008, largely due to investment losses.

In October, Mozilo agreed to a $67.5 million settlement with the SEC to avoid trial on civil fraud and insider trading charges that alleged he profited from doling out risky mortgages while misleading investors about the risks.