October 01, 2010, 3:47 PM EDT

By Joel Rosenblatt

(Updates with Brown’s statement in fourth paragraph.)

Oct. 1 (Bloomberg) — JPMorgan Chase & Co., the third- biggest U.S. mortgage servicer, must prove its home foreclosures are legal, and if it can’t, must stop the practice, California Attorney General Jerry Brown said.

JPMorgan is asking courts to delay judgments in pending foreclosure cases while the bank reviews and possibly resubmits statements. JPMorgan said this week it is re-examining foreclosure filings after learning employees may have signed affidavits without personally reviewing underlying records, relying instead on other personnel.

Brown made a similar demand on Sept. 24 of Ally Financial Inc.’s GMAC Mortgage unit, which is being investigated by attorneys general in Texas, Iowa and Illinois after the lender said it would halt some evictions following a discovery of faulty documentation.

“JP Morgan Chase, like GMAC’s Ally Financial, has admitted that its review of key foreclosure documents was a ruse,” Brown said today in an e-mailed statement.

JPMorgan can’t record defaults on mortgages made from Jan. 1, 2003, to Dec. 31, 2007, unless, with “limited exceptions,” the lender had tried to determine whether the borrower is eligible for a loan modification, according to Brown.

Thomas Kelly, a spokesman for New York-based JPMorgan, declined to comment.

Yesterday, Illinois Attorney General Lisa Madigan, questioning whether JPMorgan is violating state consumer protection laws, demanded a meeting with the lender to discuss its foreclosures. Earlier today, Connecticut Attorney General Richard Blumenthal asked the state Judicial Department to freeze home foreclosures for 60 days, citing reports on GMAC and JPMorgan.

–With assistance from Dakin Campbell in San Francisco, Rick Green in New York and Andrew M. Harris in Chicago. Editors: Michael Hytha, Charles Carter.

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.

Author: timothymccandless

I have spent most of my professional life helping people who were being taken advantage of by systems they did not fully understand. As an attorney, I represented consumers against predatory lending practices and worked in elder law protecting seniors from fraud. My family lost $239,145 to identity theft, which became the foundation for my seniorgard.onlime and deepened my commitment to financial education. Since 2008, I have maintained a blog at timothymccandless.wordpress.com providing free financial education. Not behind a paywall. Free, because financial literacy should not cost money. I trade with real money using the exact strategy described in this book. My current positions: Pfizer at $16,480 deployed generating $77,900 per year net. Verizon at $29,260 deployed generating $51,000 per year net. Combined: 293% annualized pace. These are my only active positions. Not cherry-picked. View all posts by timothymccandless