A PRRAC report (March 2015). By Demelza Baer & Philip Tegeler.
Overall, the three multi-billion dollar settlements between the government and Bank of America, Citigroup, and J.P. Morgan for materially misleading statements and representations in the securitization of RMBS and CDOs and violations of law related to the banks’ mortgage origination and underwriting practices are positive from an affirmatively furthering fair housing perspective. The settlements all implicitly recognize the connection between the disproportionate predatory lending in residentially segregated communities during the lead-up to the housing bust, and the misrepresentations and omissions about those underlying mortgages when they were securitized and traded on the secondary mortgage market. However, there are improvements that the government can adopt when negotiating future settlements in order to more fully steer financial funds towards affirmatively furthering fair housing. While one-time fines may temporarily create more accountability for violations, dismantling the nation’s residential segregation will help avert a future housing crisis and the ensuing financial crisis in the markets.