By D.C. Denison Globe Staff

Thousands of black and Latino homeowners in Massachusetts will likely save money under a $125 million subprime lending settlement with a subsidiary of H&R Block Inc. unveiled today by attorney general Martha Coakley. The agreement resolves allegations of unfair lending and discriminatory practices by Sand Canyon, formerly known as Option One.

Under the deal, Sand Canyon, based in Irvine, Calif., will pay $9.8 million to the state and direct American Home Mortgage Servicing Inc. -- which services about 5,500 loans in Massachusetts that originated with Option One -- to begin a $115 million loan modification program.

Homeowners with Option One loans could receive lower monthly payments, andinterest rates, and have their principal balances reduced to reflect current property values. In addition, some borrrowers will receive refunds for fees they paid that the state considered excessive.

“Option One made loans that it knew were likely to fail and it discriminated against African-American and Latino borrowers,” Coakley said during a press conference.

Option One originated about 32,400 loans in Massachusetts between 2004 and 2007 -- including 4,400 for black and Latino borrrowers -- before the market for subprime loans collapsed and the company ceased mortgage lending. Subprime lending -- a practice that became rampant during the housing boom -- involved loaning money at high interest rates to people with tarnished credit or incomes too low to justify the amount they borrowed.

“We are pleased with the final outcome and believe this is good for all parties involved,” said Dale Sugimoto, president of Sand Canyon, in a statement.

Coakley sued Option One, alleging that the company knew many of its loans were doomed to fail, but approved them anyway to generate fees and then sell them to the secondary market at a profit.