NEW YORK (CNNMoney.com) -- As part of a probe into loan servicers' foreclosure practices, state attorneys general want banks to revamp their procedures and stop foreclosure proceedings on homeowners seeking loan modifications.
Iowa Attorney General Tom Miller, who has been leading a 50-state probe into loan servicers' foreclosure practices since October, revealed to lawmakers Tuesday some of the goals of the investigation.
The 50 state AGs are broadening their scope beyond allegations of improper documentation and into the handling of delinquent borrowers looking for help.
Servicers have to make better decisions when it comes to modifications and pour more resources into the process, Miller testified before the Senate Banking Committee Tuesday.
"A lot more modifications should be made that aren't being made," said Miller.
One practice the attorney generals want stopped is servicers pursuing foreclosures on homeowners who are in the loan modification pipeline. Homeowners can get very confused and upset when they receive foreclosure notices at the time when servicers have agreed to reduce their payments to more affordable levels.
The so-called dual-track system is allowed under President Obama's loan modification program. But banks are not allowed to actually sell the home until determining that the homeowner is not eligible for a modification.
In addition, the state officials want servicers to assign one person to each homeowner's case to make the modification process smoother. And they want an oversight system that could assign a monitor or levy penalties for servicers who are not complying with the rules.
Miller told lawmakers it could be months before the probe is finished. His office denied reports Tuesday that a settlement is near.
The investigation began when court proceedings revealed that bank officials had signed thousands of foreclosure affidavits without reading them, a practice known as robo-signing.
The attorney generals are talking to federal agencies, the administration, and mortgage investors, in addition the banks. They have had two sessions recently with Bank of America (BAC, Fortune 500).
BofA, the nation's largest servicer, is looking into halting the foreclosure process, said Barbara Desoer, head of the bank's home loan division, at Tuesday's hearing. However, contracts with investors stand in the way.
The servicer has revamped its foreclosure practices in the wake of the paperwork scandal. Among the changes is assigning a representative to each borrower seeking a modification.
"We know we need to provide greater clarity to our customers, who are going through the process," she said. 
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