Image caption Agents used by banks to sort out foreclosures may have acted illegally

Massachusetts is suing five major banks alleging "illegal" and "deceptive" conduct in the way they seized homes during the financial crisis.

Bank of America, JP Morgan, Wells Fargo, Citigroup, and GMAC must pay for the "harm" caused, the writ says.

Martha Coakley, the state's attorney general, said the banks had no legal right to foreclose on "hundreds, if not thousands, of properties".

The banks have expressed disappointment over the move.

Massachusetts' action could potentially de-rail attempts to reach a US-wide settlement against banks accused of hastily calling in debts as the country's property bubble imploded.

Federal and state prosecutors have been negotiating a $25bn (£16bn) deal to resolve the issue over so-called "robo-signing", where banks employed people to sort out foreclosure documents without reviewing homeowners paperwork and circumstances.

Ms Coakley said: "We have two clear goals with this lawsuit - one is to provide for real accountability for the role the banks have played in unlawful and illegal foreclosures, and secondly to provide for real and enforceable relief for the harm that the misconduct has caused."

The complaint claims the banks violated Massachusetts law with "unlawful and deceptive" conduct in the foreclosure process, including unlawful foreclosures, false documentation, robo-signing, and deceptive practices related to loan modifications.

'It's taken too long'

A statement from the state attorney general's office said: "The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis.

"Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behaviour and real relief for homeowners."

In October 2010, major banks temporarily suspended foreclosures following revelations of fraudulent documents processed by banks.

Ms Coakley said banks have had more than a year to "show accountability for this economic mess," and have failed to do so. "It's taken too long," she said.

Citigroup said it would defend its actions vigorously. Bank of America said it wanted a collaborative resolution to the issue.

JP Morgan said in a statement that it was disappointed the lawsuit was filed while negotiations were ongoing about a broader settlement.

GMAC said it was unhappy that Massachusetts "elected not to continue a more constructive path that could help borrowers in the state, but rather has chosen to use the court process."

Wells Fargo said it disagreed with Ms Coakley that it had not kept a promise to modify loans.

Citigroup said it had not yet reviewed the lawsuit, but the bank believed it had operated appropriately and in compliance with existing laws.