New York State has slapped Prospect Mortgage with a $3 million fine for misleading homeowners on their interest rates, and has cited the mortgage lender for several other violations of state law.

An examination of Prospect Mortgage conducted by the state's Department of Financial Services uncovered a handful of violations by the company, the state announced Wednesday. Prospect, which is one of the largest independent residential mortgage lenders in the country, agreed to pay $3 million to settle the allegation that it charged borrowers upfront fees in order to reduce their interest rates over the life of the mortgage, then failed to deliver the promised discounts. It will also refund $427,155 to the homeowners who were harmed.

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