Five audits conducted by the U.S. Department of Housing and Urban Development have accused the nation's five largest mortgage servicers of fraud against American taxpayers in their handling of foreclosures bought with government guaranteed loans.  The agency conducted five separate investigations into the foreclosure processes of Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, and Ally Financial.

In the end, the audits accused the lenders of violating the False Claims Act, a law that stems back to the Civil War designed to prevent criminals from defrauding the U.S. government.  According to sources familiar with the investigations, the audits were conducted between February and March this year.  The internal watchdog division of HUD has referred the results of the audits to Department of Justice officials, which now will decide whether or not to file charges against the lenders.

The audits are just the latest developments stemming from the national foreclosure crisis that has struck the nation since the end of the last housing boom.  Federal and state agencies launched a number of probes into lenders' practices after it was discovered that many had improperly accelerated the process by failing to gather required paperwork.  The most damning discovery was that many lenders used so-called robo-signers, or employees who just signed off on hundreds of documents a day without verifying their authenticity.

Sources say that the findings of these investigations are alarming, implicating many major lenders of improper procedures.  State officials are now using the findings as leverage in talks with the lenders aimed at reaching settlements to avoid official charges.  State officials want fines to be levied to settle the charges, rather than allow for individual cases to be brought against the lenders.

HUD's audits, meanwhile, allege that the banks essentially defrauded taxpayers by presenting false claims to the Federal Housing Administration when they filed for compensation for failed mortgages in cases where the foreclosure process was improperly conducted.  Two of the firms, including BAC, the nation's largest mortgage provider, refused to cooperate with the HUD investigation.  The audit on BAC found that the bank failed to remedy improper practices even after a self-imposed moratorium on seizures, which it lifted last October.