The attorney general of New York Eric Schneiderman has revealed he plans to sue Bank of America and Wells Fargo for violating a $25 billion mortgage settlement.
Mr Schneiderman said the two major lenders had not done enough to protect homeowners.
Five US lenders agreed the National Mortgage Settlement with the authorities last year in an attempt to reshape lending practices after the collapse of the housing market.
New York’s top prosecutor said he has received 339 complaints about banks not acting quickly enough in processing requests from homeowners to have their loan payments lowered, which is a direct violation of the agreement.
Mr Schneiderman said: "The five mortgage servicers that signed the National Mortgage Settlement are legally required to take specific, rigorous, and enforceable steps to protect homeowners."
The official committee in charge of monitoring the mortgage settlement has been notified of his intention to sue and now has 21 days to decide whether to pursue the case under its own authority.
By Claire Archer