Lawmakers pressed major banks and federal regulators on Thursday to explain how they allowed faulty paperwork problems to fester into a controversy that could slow home sales and raise costs for new borrowers.

Major lenders admitted to sloppy documentation in testimony to a House of Representatives’ subcommittee but said they had taken steps to tighten procedures and that the basis of their foreclosures has been accurate.

It was the second congressional hearing this week into revelations that lenders have used “robo-signers” to sign hundreds of foreclosure documents a day without proper legal reviews.

“I want to know, given the problems in the mortgage servicing industry — problems which have been apparent for years — what are government and industry witnesses intend to do to fix these problems and why any of them should keep their jobs,” said Maxine Waters, who chairs the House Financial Services housing subcommittee.

Officials from the Federal Reserve and other bank regulators were appearing along with executives from Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial.

Mortgage servicing and foreclosure practices are being investigated by both federal officials and all 50 state attorneys general.

John Walsh, acting comptroller of the currency, said the problems were isolated at specific institutions, rather than a widespread industry issue. “I am not aware of a reason to believe there is a systemic failing of the system,” he said.

The paperwork fiasco has reignited public anger with banks that received billions of dollars in taxpayer aid during the financial crisis.

A leading Republican on the subcommittee, however, said he is pleased with the steps banks have taken to deal with the paperwork problems.

Randy Neugebauer said he was concerned that delinquent borrowers and their lawyers were seizing on the issue.

He said this could force delays in completing legitimate foreclosures and result in higher fees and interest rates for borrowers who are making their payments. “That’s just not right,” said Neugebauer.

Federal banking regulators warned in prepared testimony that banks could face fines or criminal referrals if widespread problems are found in foreclosure documents used to evict hundreds of thousands of homeowners.

The Fed and other bank overseers are also advising lenders to maintain sufficient capital to cover any losses associated with documentation problems, including delays in the sale of foreclosed properties.

Fresh data released Thursday showed the U.S. housing recovery is still uneven.

The mortgage delinquency rate declined last quarter amid hints of improvement in the job market, but that bit of good news was countered by headwinds from defaults and rising foreclosure starts, the Mortgage Bankers Association said on Thursday.

Top bank executives have said this week they want a settlement soon of the states’ probe but the attorneys general have said a deal could be months away.

Any settlement is likely to require banks to make greater efforts to keep borrowers in their homes.

Ahead of the hearing, Bank of America said it was modifying mortgages at a faster rate in October, and said it was working hard to keep troubled borrowers in their homes when they do not qualify for government assistance.

Fed Governor Elizabeth Duke told the hearing she would support some sort of mechanism like a nationwide fund for homeowners wrongly foreclosed upon — an idea being considered by the state attorneys general.

“I think would be very positive if there was a mechanism to deal with these problems as they arise,” Duke said.