The Huffington Post has revealed that a set of confidential federal audits accuse the nation?s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans. The audits conclude the banks cheated the government by overvaluing their losses on foreclosed homes and submitting faulty and defective documents to get federal reimbursement. According to the audit, the banks?Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial?violated the False Claims Act, which protects the government from fraudulent billing. The findings have been referred to the U.S. Department of Justice. Rush transcript: AMY GOODMAN: The Huffington Post has revealed a set of confidential federal audits accuse the nation?s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans. The audits conclude the banks cheated the government by overvaluing their losses on foreclosed homes and submitting faulty and defective documents to get federal reimbursement. According to the audit, the banks violated the False Claims Act, which protects the government from fraudulent billing. The findings have been referred to the Justice Department. The companies named are Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. Two of the banks, including Bank of America, refused to cooperate with investigators. The audit concludes Bank of America failed to correct its practices even after renewing foreclosures following a brief moratorium last year. The moratorium was imposed following revelations bank employees had approved thousands of foreclosure affidavits and other documents without proper vetting. State officials are hoping to use the audit?s findings as leverage in their ongoing talks with the banks to settle the foreclosure fraud allegations. For more, we?re joined by Shahien Nasiripour, a senior business reporter for the Huffington Post. He has been reporting extensively on the talks over the settling of the foreclosure fraud allegations and broke the latest story on the audit?s findings. Welcome to Democracy Now! SHAHIEN NASIRIPOUR: Thanks for having me. AMY GOODMAN: Explain it in full detail. SHAHIEN NASIRIPOUR: In terms of this particular audit? So, the Department of Housing and Urban Development, which?they oversee the FHA, the Federal Housing Administration?they have an internal auditor, the inspector general. So the inspector general went back, and they reviewed foreclosures on homes that were purchased with government-backed loans. And they looked to see how?you know, when the banks repossess these homes, and if they sell for the value that?s less than the outstanding mortgage, they?ll file with FHA a claim for reimbursement, because they?re insured by the government. And so, the HUD IG went back and looked at how the foreclosures were being processed, whether they used defective documents, false affidavits, any other kind of faulty documents which may not have conformed with state or local laws or federal rules. And for these five institutions, they found that they submitted false documents, and they claimed government reimbursement, and so taxpayers suffered losses. And because they defrauded the government, the government is now alleging they broke the False Claims Act, which is a Civil War-era law used to go after folks who swindle taxpayers. And so, that?s where we?re at right now. AMY GOODMAN: So, who?s being held accountable right now? How does this fit into the settlement talks that the government is engaged in with these banks? SHAHIEN NASIRIPOUR: So, the HUD IG referred these to Justice. So nothing can really happen unless Justice brings charges. But now the pressure is on the Department of Justice, because now we know the existence of these reports. In terms of the ongoing settlement discussions, the states and their federal partners who are involved in talking with the five institutions, they were hoping to use these audits, kind of keep them in their back pocket as leverage, if?you know, last week, the banks gave what was perceived as a lowball offer, $5 billion, to settle all claims, all mortgage-related probes. And state and federal officials deemed that far too low. And so, now we have these audits that are on the table, and the banks know that essentially the government is here to play ball, and they?re not messing around. AMY GOODMAN: Talk about Bank of America, in particular, Shahien. SHAHIEN NASIRIPOUR: So, Bank of America, back last autumn, they halted all home seizures in judicial foreclosure states. These are states where you have to actually go to court to repossess someone?s homes. And they kind of expanded their moratorium because there were revelations that they employ so-called robo-signers and they used faulty and defective documents. When you go to seize someone?s home, essentially you?ve got to cross all your T?s and dot all your I?s. You have to swear before the court that you?ve reviewed all the documents, all the documents are truthful, you?ve gone over everything. And they allegedly didn?t do so, and they didn?t do so on a mass scale. And so, they halted home seizures. About 10 days later, they start them up, and they say that they had fixed everything and that everything was on the up and up. Well, the HUD IG says that it?s actually not true. They didn?t correct all their problems. They still had deficiencies. Yet they still went through and claimed that everything was OK. That?s one thing. The second thing is, BofA is one of two firms that allegedly did not cooperate with investigators, which?you know, on one hand, firms like BofA, Wells Fargo, Citi, JPMorgan Chase, they?re subject to thousands of lawsuits and thousands?God knows how many regulatory investigations. So it?s interesting that while they make bank employees available, they make documents available, they apparently chose not to cooperate with this one. That?s something I?m still trying to dig into. I?m actually not clear on how they didn?t cooperate. A lot of the details really aren?t clear, because these are confidential audits. AMY GOODMAN: The State of New York has also launched an investigation into Bank of America, Goldman Sachs and Morgan Stanley over the mortgage security operations at the three banks. SHAHIEN NASIRIPOUR: Correct. So, the New York Attorney General, Eric Schneiderman, he?s empowered with the Martin Act, which is this law that?s actually kind of amazing, because the New York Attorney General can really investigate whatever he wants with respect to Wall Street and with respect to securities. He?s not hamstrung like other states who don?t have these?they don?t have these statutes on the books. And so, he can look at pretty much anything he wants. And right now he?s focused on mortgages. So he?s looking at essentially predatory lending, how these loans were bundled and packaged into securities, whether they followed the law, whether they deceived investors?the whole gamut. AMY GOODMAN: One last question, Shahien, and that?s about banks foreclosing illegally on active-duty soldiers. SHAHIEN NASIRIPOUR: Right. AMY GOODMAN: The significance of this? A review of about 2,000 loans that experienced foreclosure, what, about 50 active-duty soldiers, their homes were foreclosed on? SHAHIEN NASIRIPOUR: Well, that?s what we know of. That?s based on?government regulators looked at 2,800 loans. They looked at 14 mortgage firms. AMY GOODMAN: We have 10 seconds. SHAHIEN NASIRIPOUR: OK. Out of two of those 14, they found almost 50. So who knows how many actually were illegally foreclosed on? AMY GOODMAN: Well, Shahien Nasiripour is senior business reporter for the Huffington Post. We?ll link to his articles there.