Push to halt foreclosures gains steam

NEW YORK (CNNMoney.com) -- Pressure is mounting on U.S. banks to halt more foreclosures amid widespread allegations that loan servicers failed to verify legal documents in what could be hundreds of thousands of cases.

Members of Congress from California wrote to the heads of the Justice Department, the Federal Reserve, and the Comptroller of the Currency on Tuesday, requesting that they investigate the foreclosure processes of banks under their purview for "possible violations of law or regulations."

In Texas, the Attorney General's office sent "suspension notices" to 30 loan servicers in the state, asking them to halt foreclosures until they have completed a review of their procedures. The Attorney General in Massachusetts also urged financial institutions in the state to put a hold on all foreclosures.

The moves come after Ally Financial, JPMorgan (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) all announced plans last week to freeze foreclosures in the 23 U.S. states where they must be approved by the courts.

Foreclosures continue in the remaining 27 states, including California and Texas, where they are not subject to judicial review. Two other major financial institutions, Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500), have yet to halt any foreclosures.

Ally, JPMorgan and Bank of America have acknowledged that some employees had signed off on foreclosure affidavits without verifying that the legal documents were accurate, in a process that has become known as "robo-signing." The banks are reviewing their foreclosure processes to ensure that the documents are correct and say they will amend any that are found to be wrong.

Sen. Robert Menendez, D-N.J., wrote Tuesday to the chief executives of the three banks, along with officials at 117 mortgage servicing companies, requesting details on their internal investigations and what is being done to fix the problem.

Menendez, along with Sen. Al Franken, D-Minn., has also asked the Government Accountability Office to open an investigation into whether "shortcomings" in federal oversight contributed to "false affidavits" in foreclosure proceedings.

"It is simply inexcusable that proper oversight proceedings were not in place, especially when dealing with matters as monumental as the seizure of a family's home," wrote Menendez, chairman of the Senate subcommittee on housing, transportation and community development.

JPMorgan declined to comment on the letter, and Bank of America did not immediately provide a response.

Ally, formerly known as GMAC bank, said it could not comment on specific letters but reiterated that it is investigating the matter.

"We are confident that the processing errors did not result in any inappropriate foreclosures," Ally said in a statement. "GMAC Mortgage takes this matter very seriously, and we are acting with urgency to resolve the issue in the affected states."

The development has drawn even more attention to the ongoing foreclosure crisis in the United States and the limited success of federal programs aimed at helping troubled homeowners.

In their letter to the regulatory agencies, California lawmakers, including House Speaker Nancy Pelosi, said lenders in the state have routinely resisted working with borrowers hurt by the weak economy. They argued that banks are slowing the economic recovery by worsening the foreclosure crisis.

The recent revelations "only amplify our concerns that systemic problems exist in the ways many financial institutions have dealt with homeowners who are seeking to avoid foreclosures," the letter said. "It is time that banks are held accountable for their practices that have left too many homeowners without real help."