The investigation follows complaints from House Speaker Nancy Pelosi and 30 other California House Democrats who charge homeowners can't get help such as loan modifications because banks lose paperwork or don't respond when homeowners ask what they need to do to avoid foreclosure, The Hill newspaper reported.
"It appears that banks have repeatedly misled and obstructed homeowners from receiving the help Congress and the administration have sought to provide," the lawmakers said in a letter to the department and other agencies.
Some financial institutions have halted foreclosures over concerns about incomplete or inaccurate paperwork, The Hill said.
Some of the problem stems from "robo-signers," the newspaper said, middle managers who sign affidavits allowing banks to repossess homes that are in default. Several admit they signed off on thousands of foreclosures without fully reviewing the documents, The Hill reported.
Amid a record number of foreclosures, Delaware, Texas, Maryland, Ohio, Connecticut, Florida, North Carolina, Iowa and Illinois are among a growing number of states asking some banks to halt foreclosures because of possible problems.