The uncertainty over the legal status of foreclosed homes in the nation could further depress home prices and delay the recovery of the housing market, the Obama administration said on Wednesday.
The warning came at the first Congressional hearing since the magnitude of the problem gained wide attention. Distressed properties make up one quarter of all home sales.
Revelations about paperwork shortcuts and so-called robo-signed affidavits, as well as the likelihood of protracted legal battles by homeowners and inquiries by state and federal officials, will hinder foreclosure proceedings and discourage prospective buyers, a Treasury Department official said.
“Together, these two factors may exert downward pressure on overall housing prices both in the short and long run,” said the official, Phyllis R. Caldwell, chief of the homeownership preservation office at the Treasury.