In a major development, California’s Attorney General, Kamala Harris, has broken off from the proposed 50-state settlement over foreclosure fraud. If the talks weren’t dead already, and if you’ve read this space you’d know that I think they were, this surely puts them to bed.

California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation’s biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

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, a person familiar with the matter said.

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, the person said.

Harris spent the entire day last Friday in a room with representatives of the big banks, giving them every opportunity to come up with a solution that presented California homeowners with relief commensurate to the liability release they wanted. I think that Harris would have signed on to a deal if she got what she needed out of it. But the banks clearly would not deliver that level of relief, and they still wanted a sweeping liability release, which Harris was unwilling to provide.

Harris’ full letter to Thomas Perrelli of the Justice Department and Iowa AG Tom Miller is here. As far as where she goes from here, she writes:

I intend to continue to investigate the mortgage practices that I believe have contributed to the growing housing crisis in my state. Months ago, I began California’s independent work in this respect by establishing a Mortgage Fraud Strike Force, and I have given the Strike Force attorneys a broad mandate to investigate all stages of the mortgage lending process, from origination to servicing and foreclosures to securitization of loans into investments in the secondary market. I am committed to doing as thorough an investigation as is needed – and to taking the time that is necessary – to set the stage for achieving appropriate accountability for misconduct.

I will also push for additional legislation and regulations that enhance transparency and eliminate incentives to disregard borrower’s rights in foreclosure. Many of these reforms have been identified in the multistate talks, and I hope that in good faith the banks will adopt these reforms immediately.

Fat chance of that. But overall, this is a great pledge to seriously investigate the banks on a wide range of mortgage and foreclosure issues, and to seek the appropriate remedies. Bravo to Harris, and that comes from a constituent.

I have to think that the public pressure, particularly what we saw in the last couple days with even Gavin Newsom stepping in to challenge Harris to reject the settlement, had a huge impact. Harris was a surrogate for the Obama Administration from way back. She spoke for him at the 2008 Democratic Party convention in the state, with her counterpart for Hillary Clinton being the 43rd 42nd President of the United States. 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.

As for Tom Miller, his dream of getting the banks off the hook for their crimes is dead and buried. Without California and New York, you’re not going to be able to have a settlement that means anything. He’s probably looking for a way out right now.

The investigations have to be followed through. But this is a victory so far for accountability and against the whitewashes that have characterized the nation’s response to systemic fraud in an increasing and troubling fashion over the past several years.

UPDATE: A very legitimate question was raised in the comments about the status of the Mortgage Fraud Strike Force, which Harris in her letter stated would handle the investigation. Earlier, because of budget cutbacks, it was reported that the Strike Force was gutted. But Harris’ office says that personnel and funding was moved around to make the investigation a priority. There were 25 people in the Strike Force when it launched; now there are 30, according to the AG’s spokesman, Shum Preston.