September Bank Foreclosures Reach New Record

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Statements from Miller and other state investigators said the initial focus will be on whether industry employees -- so-called "robo-signers" -- signed off on thousands of foreclosures every month without reviewing the files as legally required.

"Robo-signing is the one [problem] ... we're most concerned about," Miller told reporters late Wednesday, but he added, "We're not ruling out other issues."

The immediate goals of the investigation appear to be a halt of improper foreclosures and a review the past and present mortgage service practices, investigators said.

"We want this to never happen again," Miller said. "We will try to do this as quickly as possible."

In courts throughout the nation, homeowner attorneys have alleged that lenders forged signatures and improperly notarized documents in the rush to foreclose on homeowners.

The joint investigation into the practices of the booming mortgage-servicing industry could pressure financial institutions to rewrite a sea of corrupt paperwork.

Previous calls for a nationwide foreclosure moratorium had industry insiders worried but the states stopped short of requesting such a measure.

"The worst thing anybody could do right now is impose a lengthy moratorium on foreclosures, particularly if it results in people not being able to sell properties that have already been foreclosed on," said Rick Sharga, vice president of the real estate data firm RealtyTrac. "Right now, foreclosure properties represent about 30 percent of all home sales, and to take 30 percent of sales out of the housing market at a time when it's already unstable could have pretty disastrous results."

The Obama administration Monday rejected calls for a nationwide moratorium on foreclosures amid growing concerns about the market's recovery.

A moratorium would help families on the verge of losing their homes, but Sharga and other industry experts said it would lead to a backlog of homes on the market and further depress prices.

Even with tight lending standards, the nation is on pace to sell 4 million properties by the end of the year. That's way down from the peak of the housing boom when over 6 million were sold annually, however.

"The housing market is trying to recover ... but right now these technical delays are causing additional uncertainly," said Lawrence Yun, chief economist for the National Association of Realtors. "Some potential buyers may not want to enter the market now. And that will hold back the recovery time."

In recent weeks, major lenders such as JPMorgan Chase, Ally Financial's GMAC Mortgage unit and Bank of America have conceded that paperwork supporting an unknown number of foreclosures contain errors ranging from wrong dates to forged or inconsistent signatures. In some instances, mortgage company employees signed foreclosure documents without first verifying the information in them.

In response, the banks have suspended tens of thousands of pending foreclosures. Bank of America, for example, has suspended all its foreclosures in 23 states.

With reporting by ABC News' Ray Sanchez.

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