By Karen Freifeld

NEW YORK (Reuters) - Bank of America Corp's proposed $8.5 billion settlement with investors in mortgage securities that went bad during the financial crisis offers billions more than they are likely to get if they go to trial, a lawyer for the trustee who helped negotiate the deal argued Monday.

Matthew Ingber, a lawyer for Bank of New York Mellon, the trustee overseeing the securities, made the case for the deal as a long-awaiting proceeding for approval of the settlement got underway in state court in New York.

Bank of America agreed to the settlement in June 2011 to resolve the claims of investors in bonds issued by mortgage lender Countrywide Financial Corp, which Bank of America bought in 2008.

Twenty-two institutional investors, including BlackRock Inc , MetLife Inc and Allianz SE's Pacific Investment Management Co entered into the settlement. American International Group Inc and others have objected, saying the settlement offered them only a fraction of the money they lost.

Bank of New York Mellon, as the trustee, is asking a New York state court to approve the settlement and make it binding on all the investors.

In court on Monday, Ingber said Countrywide had a maximum of $4.8 billion in assets to pay a judgment on the claims. If the settlement is not approved, investors probably won't be able to hold Bank of America responsible for misrepresentations made by Countrywide on the quality of the underlying mortgages, he said.

"You may hear a lot from the objectors about what the trustee should have done or could have done or might have done," Ingber told Justice Barbara Kapnick, who must decide whether to approve the deal. "But, your honor, all those coulda, woulda, shoulda are irrelevant if the pot of gold isn't going to be there."

Opening arguments are set to continue on Tuesday, with Texas attorney Kathy Patrick making the case for the institutional investors who support the settlement.

The opponents are expected to argue that losses to the trusts might exceed $100 billion. They claim BNY Mellon placed its interests and those of Bank of America above those of bond holders. And they point out BNY Mellon gets trust business from Bank of America.

Colorado attorney Dan Reilly, who represents AIG, said last week the proposed deal "offers pennies on the dollar" to the bond holders.

A lawyer for the federal home loan banks of Boston, Indianapolis and Chicago is expected to join AIG in an opening statement on behalf of the objectors on Tuesday.

Ingber argued Monday that the trustee did not receive any money or a release of claims in the settlement agreement. He told Kapnick the questions she had to answer were whether the trustee entered into the deal in good faith and whether the settlement was reasonable.

"This was an easy call and it was done for all the right reasons," Ingber said. "Approval of this settlement is a win for all investors."

Kapnick has set aside the first two weeks of June to hear the case. She said that because of other cases, she will then recess until July.

A ruling could take months after the trial is completed.

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

(Reporting by Karen Freifeld; Editing by Eddie Evans and Lisa Shumaker)

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