An Irvine-based subprime mortgage lender has agreed to pay $28.2 million to settle government charges that it failed to disclose its deteriorating financial condition amid the industry’s collapse in 2007.

Option One Mortgage Corp., which now operates under the Sand Canyon Corp. name, was charged by the Securities and Exchange Commission with misleading investors over the state of its financial condition in 2007, while at the same time selling them more than $4 billion of subprime residential mortgage-backed securities.

The SEC filed a complaint on Tuesday in the U.S. District Court for the Central District of California, while at the same time announcing that the lender had agreed to settle the charges.

The proposed settlement is subject to court approval.

Irvine-based Option One had been among the nation's top lenders to borrowers with imperfect credit during the last housing boom, with some $40 billion of business in 2006 alone, but soon ran into financial issues amid the subprime lending industry’s collapse.

At the time of the allegations, the company was owned by Kansas City-based tax preparer H&R Block Inc. Its loan servicing business was sold off to WL Ross & Co. in 2008 to pay off debt.

During the housing boom, Option One and its related mortgage businesses were the most profitable part of H&R Block’s business.