New York AG coy about joining mortgage settlement

Wed Jan 25, 2012 1:27pm EST

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(Reuters) - New York's attorney general on Wednesday said he still had concerns about a broad multi-state settlement to resolve allegations of mortgage abuses, keeping open the question of whether he would sign the pending deal.

In response to reporters' questions about the negotiations, Attorney General Eric Schneiderman said: "My concern with that has always been to make sure that we're not releasing claims that obviously now are even more important to me because I'm investigating them."

Late on Tuesday President Barack Obama announced the creation of a new unit at the U.S. Justice Department to coordinate inquiries into abusive home-loan lending and the pooling of risky mortgages that sparked the housing crisis.

Schneiderman was tapped to help lead the unit, prompting speculation that the new position was partly aimed at persuading him to join the settlement.

That announcement comes as state and federal officials near a deal with top U.S. banks to resolve claims of misconduct in processing foreclosures.

In exchange for up to $25 billion of relief to homeowners, including principal reduction on troubled loans, the banks will put behind them potential government lawsuits about improper foreclosures and abuses in originating and servicing mortgage loans.

As talks dragged into their second year, states including New York criticized the direction of the negotiations and said the proposed deal released the banks from too many claims and did not provide enough relief to homeowners.

State and federal negotiators are trying to get as many states as possible on board, to create a nationwide mechanism to help homeowners and to aid the housing recovery.

(Reporting By Aruna Viswanatha in Washington D.C. and Karen Freifeld in New York; Editing by Tim Dobbyn)

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