Just months after reaching a settlement with a New York regulator over its practices involving interest rates, Prospect Mortgage LLC has reached a settlement with a California regulator over how it charges interest.
The lender allegedly overcharged more than 12,000 Golden State borrowers for per diem interest in violation of the California Residential Mortgage Lending Act.
Home lenders in California are allowed to charge borrowers for only one day of interest prior to the disbursement of loan proceeds.
However, a high number of per diem interest violations by the Sherman Oaks, Calif.-based firm were uncovered in a regulatory examination by the California Department of Business Oversight.
Prospect was directed to complete an extensive audit on its self for the period from August 2006, through June 2013. The audit revealed problems with its policies and procedures.
Prospect has agreed to settle the violations with the state, a statement Friday said.
As part of the settlement, the lender has agreed to pay $1.33 million in refunds to 12,580 impacted consumers and another $1.8 million in administrative fees.
In addition, Prospect agreed to make significant changes to its policies and procedures so that it complies with California law.
California Department of Business Oversight Commissioner Jan Lynn Owen noted in the announcement that this settlement serves notice to all licensed mortgage lenders that “full compliance with the law is non-negotiable.”
It’s not the only recent run in Prospect has had with regulators.
In October, the mortgage firm reached a $3.4 million settlement with the New York Department of Financial Services for allegedly charging up-front discount points without providing the promised interest rate discounts.
