A massive investigation has been launched into US banks and mortgage companies that repossessed homes in the wake of the financial crisis.

Officials in 49 states and the District of Columbia have launched a joint investigation into allegations that banks and mortgage companies mishandled documents and broke laws when they foreclosed on some homeowners.

Every state, except Alabama, will examine whether mortgage company employees made false statements or prepared documents improperly.

Employees of four large lenders have acknowledged they signed off on foreclosure documents without reading them.

An estimated 2.5 million homes have been lost to foreclosure since the recession began in December 2007.