NEW YORK, June 18 (Reuters) - New York Attorney General Eric Schneiderman said he would spend $60 million over the next three years to fund counseling and legal services for struggling New York homeowners.

The money comes from New York's share of the $25 billion mortgage settlement announced in February between 49 states, the federal government and five major banks over foreclosure abuses.

U.S. Housing and Urban Development Secretary Shaun Donovan was scheduled to join Schneiderman at an event in Hauppauge, New York, on Monday to announce the commitment.

"This program is a national model for how the settlement money should be spent," Donovan said in a statement.

Donovan has met with attorney generals nationwide to urge them to use their $2.5 billion portion of the settlement money to help homeowners rather than to plug budget holes.

Ira Rheingold, executive director of the National Association of Consumer Advocates, said it was still too early to gauge the impact of the settlement on getting mortgage principal reduced. The bigger question right now is getting states to use the money for its intended purpose, Rheingold said.

Some 11 million borrowers nationwide are underwater, meaning they owe more on their mortgage than their property is worth, according to CoreLogic, a data analysis firm.

Schneiderman has enlisted the Center for New York City Neighborhoods and the Empire Justice Center to help administer and manage grants in New York City and the rest of the state, respectively. Counseling and legal service providers should fill out applications for the money, the attorney general's office said.

Legal services for struggling homeowners were funded as part of the foreclosure process in New York through last April. Now, it is insured for three years, Schneiderman said.

(Reporting by Karen Freifeld)

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