Bank of America Corp's proposed $8.5 billion mortgage bond settlement received fresh opposition on Tuesday from New York's attorney general, who said the accord appears unfair to investors who may deserve to recover more.

Eric Schneiderman, the attorney general, filed papers on Tuesday asking a New York State Supreme Court justice for permission to intervene.

He had made the same request last August before the case moved to federal court. It returned to the state court in February.

The settlement announced last June arose from Charlotte, North Carolina-based Bank of America's 2008 purchase of Countrywide Financial Corp, once the nation's largest mortgage lender.

It was negotiated by Bank of New York Mellon Corp as trustee for 530 residential mortgage-securitization trusts from 2004 to 2008, with an estimated $174 billion of unpaid principal.

While 22 institutional investors including BlackRock Inc, Metlife Inc and Allianz SE's Pacific Investment Management Co signed onto the accord, several other investor groups complained that the payout was too low.

In papers filed Tuesday, Schneiderman raised questions about its fairness and adequacy, with investors receiving only a few pennies on the dollar for losses suffered.

Schneiderman also maintained that Bank of New York Mellon had a conflict of interest because it stood to receive financial benefits under the settlement. He dropped previous fraud counterclaims against Bank of New York Mellon.

The attorney general said his intervention could help safeguard the welfare of New Yorkers and the integrity of the securities marketplace.

Spokesmen for Bank of America and Bank of New York Mellon declined to comment. Bank of New York Mellon and lawyers for investors who support the settlement have argued that Schneiderman does not have the legal right to intervene.

The settlement requires approval by New York State Supreme Court Justice Barbara Kapnick in Manhattan.

February's decision to send the case back to state court was seen as favorable to Bank of America's effort to win approval.

Resolving legal liabilities related to Countrywide has been a central focus of Chief Executive Brian Moynihan during his 2-1/4 years at the bank's helm.

The case is In the Application of The Bank of New York Mellon, New York State Supreme Court, New York County, No. 651786/2011.

(Reporting By Karen Freifeld; Additional reporting by Rick Rothacker in Charlotte, North Carolina, editing by M.D. Golan)