We can hope so, but we’ll have to wait and see.

A few days ago we reported on GMAC and JPMorgan Chase – that they were temporarily suspending all foreclosures in 23 states while they investigated claims of “robo-signing” of foreclosure documents.

The next day Bank of America also suspended foreclosures in those 23 states.

Why 23 states? Because those states are the ones that require court approval for foreclosures. In lieu of actually going to court, they are allowed to present signed affidavits swearing that they have reviewed the files and the documents are in order.

The trouble was, they didn’t review the files and in some cases the documents were not in order. In some cases, even the monetary figures were “off.”

Their excuse for this sloppiness was that with 8 to 10 thousand forms to sign each month, they just “didn’t have time” to do it according to the legal requirements. Statements by banking officials carry a tone that suggests that since they are so busy, they are justified in cutting these corners – in spite of the potential damage to individual homeowners.

Now key lawmakers are demanding that more than 100 mortgage companies halt foreclosures while they determine whether foreclosure documents they approved might have contained errors.

The 23 states involved in this action are Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

But now, other states are weighing in.

The Texas Attorney General’s office has called for a halt on all foreclosures. They’re also asking for a halt on sales of all properties already under bank ownership as well as all evictions of persons residing in those foreclosed homes. They’re giving the banks until October 15 to reply to the demand letters.

Maryland Governor Martin O’Malley has done the same.

In Oregon, Senator Jeff Merkley has urged the Treasury Department and the Department of Housing and Urban Development to launch investigations, while Massachusetts Attorney General Martha Coakley said her office is already investigating an “Apparent failure of major creditors to follow state foreclosure law.”

In California, Attorney General Jerry Brown called on J.P. Morgan Chase & Co. and Ally Financial Inc. to suspend foreclosures unless they can prove that they are in compliance with state law.

Real estate professionals dealing with Short Sales have long been frustrated by the sloppy paperwork, lost documents, and delays that they and their clients have endured at the hands of the banking giants. At times, homes that were in the midst of short sale transactions or even loan modifications were suddenly foreclosed upon – despite assurances that the foreclosure had been halted.

Now we realize why this has happened. Employees in the Foreclosure departments simply did not read the files and thus were not aware of the loan modifications or short sales in progress.

Will the banks be punished for their fraudulent behavior? Will they owe monetary damages to homeowners who were harmed? Or will this sloppy behavior be forgiven and swept under the rug?

We’ll all be watching to see the outcome.

Fraud, greed, and government regulations led to the crash of the housing market. Now banking fraud, greed and general carelessness could lead to a stabilization in the housing market.

Why?

Because the expected glut of foreclosed homes is not going to hit the market soon. Thousands of foreclosures are being delayed and could even be cancelled.

As of now, JPMorgan Chase and GMAC have suspended all foreclosures in 23 states. GMAC didn’t provide a number, but Chase is suspending 56,000.

Home sales have been undermined these past months by the expectation that large numbers of foreclosures were about to be released – causing housing prices to slide further. That expectation has caused many consumers to put off buying a home.

If the flood stops or slows considerably, housing prices may stabilize.

How did this happen?

In their quest to speed up the foreclosure process, banks have been cutting procedural corners. Both GMAC and Chase have admitted to filing affidavits for summary judgment without knowing if the facts stated in those affidavits are true.

By signing the document, the signer indicates that he or she has personal knowledge that those facts are true. That means the signer is saying that he or she has reviewed the cases and knows the documents are correct. And that hasn’t been the truth.

It appears that banks have been taking their procedural cues from our Senators and Representatives – stating in their own defense that since they have so many foreclosures to process, they simply didn’t have time to review the cases before signing the affidavits and other documents.

The term “robo signers” has been coined to describe the way banks have handled the signing of legal documents.

Unfortunately for them, those lawmakers who sign bills into law without reading them aren’t stepping up to say its OK to file affidavits without reviewing the cases.

Shifting the blame is nothing new, and apparently banks are shifting the blame to the legal firms who supply the documents for signing. According to the South Florida Sun-Sentinel, Florida’s four largest foreclosure law firms are now under investigation for fraud.

Flordia is one of the 23 states where Chase and GMAC have suspended foreclosure activity for the time being.

Consumers are “lawyering up”

Lawsuits are already being filed, and according to lawyers representing homeowners, the lenders will likely be defeated in court due to their own carelessness. Many of the necessary documents have been misplaced or otherwise disappeared.

This will come as no surprise to real estate professionals who deal with short sales. They have been struggling with the lenders’ “lost document syndrome” for the past couple of years.

Although no others have admitted wrong-doing, Chase and GMAC are not the only banks affected. Experts predict that all banks will now take a closer look at procedures in an effort to avoid lawsuits from homeowners who feel they have been wronged.

The expectation is that banks will make a greater effort to keep people in their homes rather than rushing to foreclose. That, of course, would be good for homeowners, neighborhoods and housing prices.

Exposing and halting fraudulent activity is always a good thing. But there is one “fly in the ointment” in this situation.

Homeowners whose foreclosures are final and whose previous homes have been sold may be stepping forward to file lawsuits. If the courts find that the completed foreclosures were in fact done improperly, families who bought those foreclosed homes could find themselves entangled in a legal mess not of their own making.

Could this possibility at least temporarily slow the popularity of buying banks’ REO properties?