The audits were conducted by the Department of Housing and Urban Development’s inspector general.

another excerpt from the article:

The resulting reports read like veritable indictments of major lenders, the sources said... The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents. Two of the firms, including Bank of America, refused to cooperate with the investigations, according to the sources. The audit on Bank of America finds that the company -- the nation’s largest handler of home loans -- failed to correct faulty foreclosure practices even after imposing a moratorium that lifted last October... The Justice Department is now contemplating whether to use the HUD audits as a basis for civil and criminal enforcement actions, the sources said. The False Claims Act allows the government to recover damages worth three times the actual harm plus additional penalties.

These five mortgage behemoths (handling three-fifths of all US mortgages) apparently offered to settle last week for a collective 5 billion dollars, but the offer was deemed to be much too low.

In my opinion, as far as 'additional penalties' go, there should also be jail time for the executives that concocted the scam. I have no idea whether or not that's on the table.

Let us hope this is the beginning of at least a modicum of justice being served to the Big Banks that created the housing bubble for personal profit, to the detriment of the country.

UPDATE 1:

There's more bad news for three of the big banks regarding fishy mortgage-related practices. New York's Attorney General, Eric Schneiderman has requested info and documents from Goldman Sachs, Bank of America and Morgan Stanley pertaining to how they bundled and securitized mortgages. According to the New York Times, the request indicates that they are conducting an investigation into possible criminal activity.

full NYT article here:

http://www.nytimes.com/...

UPDATE 2:

David Dayen at Firedoglake has weighed in on the recent developments.

excerpt:

I wrote yesterday that nothing seemed to be changing in the foreclosure crisis. Regulators were still trying to enforce the law with inadequate information (perhaps deliberately), and the banks were still abusing their customers. But late yesterday we got word of federal audits from HUD showing violations by the top five banks of the False Claims Act ... A few things jump out. One, this is a similar charge, from the same HUD IG findings, that the Justice Department used on Deutsche Bank in a $1 billion lawsuit, saying they lied to acquire insurance reimbursements for FHA loans that went into foreclosure. That was probably a warning shot to the big banks as well as a case in its own right. Second, this is the reason HUD has been so involved in the state AG negotiations. This amounts to swindling their department out of money. Third, this shows what a useless cover-up that federal foreclosure task force turned out to be. Over the same time period, the HUD Inspector General, a relative backwater compared to the mix of regulators working on the task force, found multiple violations of law. Fourth, the False Claims Act is not necessarily the only law I would think to use to describe the banks’ abuses in the foreclosure crisis. But sometimes you have to use what you can. And essentially, this tracks a familiar crime. What the HUD IG found was that the documents they used to file for reimbursement were faulty. ... We’re moving in the right direction with these investigations of fraud and abuse. Let’s keep it that way. If government can’t fix the housing crisis, at least they can enforce the law.

full FDL article here:

http://news.firedoglake.com/...

UPDATE 3:

According to Public Radio International and WNYC's The Takeaway, the NY AG's 'requests' are, in fact, subpoenas.

excerpt of article:



The New York Attorney General Eric Schneiderman has subpoenaed major Wall Street banks on the way they packaged mortgage-backed securities. ... Goldman Sachs, Bank of America, and Morgan Stanley -- will have to explain the way they packaged mortgage-backed securities, again. New York Attorney General Eric Schneiderman is looking for financial malfeasance.

link: http://www.pri.org/...

UPDATE 4:

From UPI:

It is likely Schneiderman will use the Martin Act of 1921 to challenge banks on their securities practices, as it does not require the state prove an intent to commit fraud. Short of having to prove intent, the Martin Act only requires prosecutors prove market manipulation or misleading statements were made. Schneiderman is also investigating firms that profited from the sharp rise in foreclosures since the economic downturn began, the Journal said.

full UPI article here:

Read more: http://www.upi.com/...