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 yesterday, according to a front page article by Sewell Chan in today's edition of The New York Times.

"The warning came at the first Congressional hearing since the magnitude of the problem gained wide attention," the article said, adding that "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."

The article said that the official, Phyllis R. Caldwell, chief of the homeownership preservation office at the Treasury, said that "Together, these two factors may exert downward pressure on overall housing prices both in the short and long run."

"The administration's testimony did little to soothe members of the Congressional Oversight Panel overseeing the Troubled Asset Relief Program, the 2008 bailout, who said the bungled foreclosures could set back the nation's fragile economic recovery," the article continued.

"If investors lose confidence in the ability of banks to document their ownership of mortgages, the financial industry could suffer staggering losses," the panel's chairman, Senator Edward E. Kaufman, Democrat of Delaware, told Ms. Caldwell. "The possibility is especially alarming, coming so soon after taxpayers spent billions of dollars to bail out these very same institutions."

Another panel member, Richard H. Neiman, the New York State banking superintendent, the article added, asked, "How do we continue to look homeowners in the eye and ask them to continue to work with their servicers given the latest news pertaining to faulty documents and fraudulent affidavits?"

While banks and mortgage servicers are bracing for a wave of lawsuits over flawed paperwork, however, the article said that Ms. Caldwell maintained that the government believed the overall risks to the financial system were "slim," adding "We're very closely monitoring any litigation risk to see if there is any systemic threat, but at this point, there's no indication that there is."

Katherine M. Porter, a law professor at the University of Iowa and an authority on mortgage servicers, however, said it was likely that "a very large number - perhaps virtually all - securitized loans made in the boom period in the mid-2000s," contained serious paperwork flaws, did not meet underwriting standards or have not been serviced properly in foreclosure proceedings, the article said.

The industry has maintained that the mistakes were limited in scope and under control, but Professor Porter said they should be "treated as part of a pattern or practice of illegal behavior and not as isolated incidents."

Julia Gordon, a lawyer at the Center for Responsible Lending, a nonprofit consumer group, urged a "temporary pause" on foreclosures to review the banks' procedures, echoing calls by groups like the National Community Reinvestment Coalition. But the Obama administration has resisted a nationwide moratorium, with the housing secretary, Shaun Donovan, saying it would "do far more harm than good."

A separate article in the same edition by Eric Dash said that "after weeks of insisting its foreclosure processes were sound, Wells Fargo & Company said on Wednesday that it planned to correct and resubmit up to 55,000 improperly filed documents by mid-November." The article said that bank officials "maintained that the underlying information in the loan files was accurate and that the bank had not improperly foreclosed on any troubled homeowners."