President Barack Obama won’t sign into law an overlooked piece of legislation that critics say would make it easier for banks and others to process foreclosure proceedings without human signatures, a person familiar with the matter said.

Mr. Obama hasn’t yet issued a veto during his presidency. In this instance, he will send the bill back to Congress using a process known as a “pocket veto.”

His decision comes amid growing complaints from lawmakers that the administration and regulators haven’t done enough to intervene in a scandal tied to thousands of foreclosures that critics argue were processed with improper documentation.