The letter was sent to Iowa Attorney General Tom Miller, who is leading the states' servicing probe, and was signed by attorneys general from Oklahoma, Nebraska and Alabama.

The letter argues that proposals aimed at forcing servicers to reduce mortgage loan balances to help keep borrowers in their homes goes too far.

The three attorneys general, all of whom are Republicans, also say that some of the proposals would override state laws and that such "policy considerations of this nature should be left to each individual state."

A group of state attorneys general and about a dozen federal agencies are probing bank mortgage practices that burst into public view last year, including the use of "robo-signers" to sign hundreds of unread foreclosure documents a day.

On March 3, state attorneys general sent banks the outline of a proposed settlement endorsed by some federal agencies, including the Justice Department, the Housing and Urban Development Department and the U.S. Treasury staff setting up the new Consumer Financial Protection Bureau.

Negotiations have focused on the top U.S. mortgage servicers, including Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial.

The state's effort is being led by an executive committee made up of 13 states. None of the three attorneys general who sent the letter on Thursday are part of this group.

New York Attorney General Eric Schneiderman, a Democrat, has raised concerns about the proposal from a different point of view. He has said he does not want any settlement to prevent his office from taking further action against mortgage servicers.