Prospect Mortgage, one of the nation’s largest independent mortgage lenders, entered a $3.1 million settlement with California regulators for overcharging mortgage borrowers per diem interest over a seven-year period.

The California Department of Business Oversight said Friday that the Sherman Oaks, Calif., mortgage lender had agreed to refund $1.3 million to more than 12,000 borrowers who were overcharged per diem interest from mid-2006 to mid-2013. California has a unique statute that prohibits mortgage lenders from charging interest on a loan for more than one day before the disbursement of loan proceeds.

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