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The call for a settlement by Bank of America CEO Brian Moynihan was followed by comments from Iowa Attorney General Tom Miller, who told a Senate hearing that a settlement with lenders was still months off.

"We're thinking in terms of months rather than a year or longer but it depends really on how far we get," said Miller, who is heading up a probe by all 50 state attorneys general.

Banks are accused of having used "robo-signers" to sign hundreds of foreclosure documents per day without proper legal review. The allegations that banks' use of shoddy paperwork resulted in struggling borrowers being illegally evicted from their homes reignited public anger with banks that received billions of dollars in taxpayer aid during the financial crisis.

In addition to the probe by the 50 states, major lenders are facing investigations by the U.S. Justice Department and federal bank regulators.

Miller, testifying before the Senate Banking Committee on issues concerning mortgage servicing and foreclosures, said the timeline for a settlement could stretch as attorneys general consider whether to expand their probe.

Earlier on Tuesday, CNBC reported that Miller was getting close to a settlement with banks. After the hearing, the Iowa attorney general denied that was the case, saying "we are a long ways from an agreement."

Miller said talks with lenders have been "productive." He said settlements could include financial penalties and a pledge that banks do away with pursuing foreclosures on an individual borrower at the same time that efforts at a loan modification are under way.

Lawmakers, while pressing for more modifications, specifically urged lenders to get rid of this so-called "dual-track" approach.

"It seems like if there's a good faith modification process under way, the foreclosure process ought to be shut down," said Senator Jeff Merkley, a Democrat from Oregon.

But Barbara Desoer, the home loans chief of Bank of America, said her bank has its hands tied in situations when it is only the servicer of a loan, not an investor, and therefore must go forward with foreclosure proceedings against delinquent borrowers.

Nonetheless, Desoer told the committee that Bank of America, the largest U.S. mortgage servicer, is working with state attorneys general on this "dual track" issue.

"We are talking to the state attorneys general under Attorney General Miller's leadership to try to amend that process because we understand how confusing it is," Desoer said.

Moynihan, speaking earlier on Tuesday at the Bank of America Merrill Lynch Financial Services conference in New York, said the industry and lawmakers need to look at streamlining foreclosures, but expressed urgency at wrapping up the joint 50-state probe.

"It is in everyone's best interest to get this settled and behind us," Moynihan said.