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Calling the national push to reform the mortgage servicing industry “inadequate,” California Attorney General Kamala Harris announced Friday that she is pulling out of the 50-state effort. The move could cause problems for the Obama administration and the nation’s largest banks, which had been pushing for a narrow investigation and a fast settlement regarding alleged servicer wrongdoing.

Mortgage servicers, many of which are owned by large banks, including JP Morgan Chase and Wells Fargo, have been accused of a variety of illegal actions including presenting forged documents in court to foreclose on families. In her letter to Iowa Attorney General Tom Miller, who is leading the settlement talks, and associate U.S. Attorney General Thomas Perrelli, Harris wrote that the investigation did not dig deep enough into the allegations, and that the resulting settlement deal currently being discussed does not provide enough money to compensate victims.

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“California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated,” Harris wrote. “In return for this broad release of claims, the relief contemplated would allow too few California homeowners to stay in their homes.”

California has been among the states hardest-hit by the bursting housing bubble. Over 560,000 homes have fallen into foreclosure since the servicing investigation began 11 months ago, Harris wrote, and 2.2 million homeowners in the state owe more on their mortgages than their houses are worth.

Harris’ decision to pull out of the nationwide settlement gives her office more latitude to conduct a wide investigation into mortgage servicing practices. If that results in findings of more widespread abuse, it could position Harris to negotiate a larger settlement. Harris already has created a Mortgage Fraud Strike Force to investigate the entire mortgage process, from loan origination through securitization.

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In her letter, Harris made clear she intends to expand that effort.

“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.”

The reference to time may be a not-so-veiled swipe at the Obama administration, which has been pushing for a speedy resolution to the servicing investigation, The New York Times reported in August. But finding common ground has been difficult. New York Attorney General Eric Schneiderman was removed from the leadership committee working to hammer out a deal after he criticized the effort for taking it easy on the industry, as we reported. On the other side, other state regulators including Oklahoma Attorney General Scott Pruitt have said the effort is too expansive.

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