Nearly a year after a nationwide working group of state attorneys general began investigating foreclosure fraud, settlement talks between Iowa Attorney General Tom Miller’s team and major lenders appear to be virtually irrelevant. California Attorney General Kamala Harris is the latest and most important state official to abandon the working group.

Several state attorneys general, most notably Eric Schneiderman of New York, have expressed concern for months that Miller’s team did not thoroughly investigate all types of alleged misconduct by large mortgage lenders. So-called “robo-signing” of foreclosure-related documents was Miller’s focus from the beginning, but evidence pointed to “systematic violations of contracts and Federal law in how servicers apply payments and charge fees to borrowers.” Meanwhile, lenders were seeking broad-based immunity from criminal and civil prosecution related to foreclosures. The clash between Miller and state officials who wanted to take a harder line became a national news story in August, when Miller removed Schneiderman from the executive committee of the 50-state working group.

Two weeks ago, Kentucky Attorney General Jack Conway came out publicly for “Wall Street accountability and against immunity for banks.” In a mass e-mail to supporters, he declared, “There should be absolutely no criminal or civil immunity given to banks for activity that has not yet been investigated.”

On September 30, California Attorney General Harris informed Miller and U.S. Associate Attorney General Thomas Perrelli that she would work independently to investigate foreclosure practices and seek relief for homeowners in her state. The Los Angeles Times reported,

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation’s five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, Harris told The Times on Friday.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street’s role in the mortgage meltdown, Harris said.

“It has been a process of negotiating and sitting at a table in good faith, but ultimately I have decided that we have to go our own course and take an independent path. And that decision is because we need to bring relief to Californians that is equal to the pain California experienced, and what is being negotiated now is insufficient,” Harris told The Times in an interview.

Here’s an excerpt from Harris’ letter to Miller and Perrelli (pdf):

California is hurting. We have the most homes and most home borrowers in default. During the period we have been negotiating, more than 560,000 additional homes in California have fallen into the foreclosure process. When we began this process 11 months ago, five of the ten cities hardest hit nationally by foreclosures were in California. Today, eight of those ten hardest-hit cities are here. And, recently, at the same time that we have been negotiating in good faith, foreclosures in California have surged again.

In our discussions, I have carefully considered every proposal on the table. Last week, I went to Washington, D.C. in hopes of moving our discussions forward. But it became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated. In return for this broad release of claims, the relief contemplated would allow too few California homeowners to stay in their homes.

Miller released a statement saying “the multistate effort is pressing forward and we fully expect to reach a settlement with the banks.” However, Yves Smith argued more convincingly that this is “game over” for Miller’s efforts:

We’ve been saying for months that the 50 state attorney general settlement was not going to happen. Despite the vigorous efforts by people on the side of the Federal regulators involved in the negotiations and Tom Miller’s (the AG leading the negotiations’) office to make it seem as if the deal was moving forward, the content of the reports showed otherwise. There was a huge gap between the positions of the banks and even the bank friendly position of the state AGs at the table and the banking regulators. […]

Now that Kamala Harris, the California state attorney general, has officially abandoned the talks, they don’t mean much, at least from the state side. The departure of such a big state, in population, foreclosure exposure, and Electoral college terms, along with other states (New York, Delaware, Nevada, Massachusetts, Kentucky, Minnesota, likely Arizona) means any settlement has limited practical meaning from the state side and even less credibility. It also considerably raises the odds of other states bolting. And needless to say, this is a major repudiation of the Obama Adminstration “let’s sweep foreclosure fraud under the rug” strategy.

David Dayen noted that Harris “was a surrogate for the Obama Administration from way back. She spoke for him at the 2008 Democratic Party convention in the state […]. She’s been mentioned as a potential US Attorney General in a second term. For her to defy the Administration on this issue is a huge turn of events.”

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