* HUD inspector general targets 5 large lenders-report
* Audits accuse lenders of defrauding taxpayers
* Audits being used in foreclosure probe settlement talks
WASHINGTON, May 16 A U.S. housing watchdog has
concluded that five large banks defrauded the government in
seeking reimbursements for mortgages on properties they
improperly foreclosed upon, according to a report in the
Huffington Post on Monday.
The findings by the inspector general of the Department of
Housing and Urban Development (HUD) target Bank of America
(BAC.N), JP Morgan Chase (JPM.N), Wells Fargo (WFC.N),
Citigroup (C.N) and Ally Financial, according to the report.
The findings have been referred to the Justice Department.
The IG's audits conclude the banks violated the False
Claims Act, a law dating back to 1863 that is designed to
protect the federal government from fraudulent bills, the
Huffington Post website reported.
The banks filed to have the Federal Housing Administration
reimburse them for federally insured loans on foreclosed
properties that were sold for less than the remaining balance
for the mortgages, according to the report.
The issue is that the foreclosures were done using improper
or faulty paperwork, according to the report.
Federal regulators and state attorneys general have been
investigating bank mortgage practices that came to light last
year, including the use of "robo-signers" to sign hundreds of
unread foreclosure documents a day.
The five banks are currently negotiating with state
attorneys general, HUD, the Justice Department, the Federal
Trade Commission and the Treasury Department over how to settle
charges that they took shortcuts when foreclosing on homes.
The attorneys general and federal agencies are using the
HUD inspector general's findings to pressure the banks during
the talks, according to the report.
A spokesman for Iowa Attorney General Tom Miller, who is
leading the states' efforts, declined to comment.
A spokeswoman for HUD declined to comment as well and a
representative for the HUD IG's office, which is an independent
agency, was not immediately available for comment.
Bank of America and Wells Fargo declined to comment.
Representatives for the other servicers were not immediately
available for comment.
Earlier this month, the U.S. government sued Deutsche Bank
AG (DBKGn.DE) for more than $1 billion, accusing the German
bank of fraud for repeatedly lying to obtain federal guarantees
on mortgages it issued.
(Reporting by Dave Clarke, Editing by Tim Dobbyn)