September 8, 2004

OFIS investigators allege widespread fraud at Loan Giant

Office of Financial and Insurance Services (OFIS) Commissioner Linda A. Watters announced that a Cease and Desist Order has been issued by OFIS against World Wide Financial Services, Inc. (WWFS), dba Loan Giant requiring it to stop violating Michigan law and further ordering it to stop engaging in fraud, deceit or material misrepresentation in connection with mortgage lending.

The Order was issued after a lengthy investigation of Loan Giant by OFIS that was launched after OFIS received a series of consumer complaints alleging fraudulent conduct. OFIS investigators allege that Loan Giant staff and executives:

• Engaged in a variety of illegal activities, including improperly qualifying mortgage loans for sale to investors by falsifying a variety of documents used by first and second mortgage lenders. Loan Giant employees allegedly misrepresented employment, income and occupancy information for numerous loan files that were sold to investors who relied that the information contained in the documentation was in fact truthful and correct.
  
• Failed to maintain appropriate books, accounts, records and documents necessary to permit OFIS investigators to determine if its activities complied with Michigan law.
  
• Failed to provide loan applicants with notices of action taken in connection with mortgage loans.

In the course of their inquiry, OFIS investigators allege that they learned that CEO Jack Wolfe personally authorized transactions dubbed "Portfolio" or "Phantom" loans. In these transactions, Loan Giant loan officers prepared and executed purchase money mortgage loan documentation with no intent to actually fund the loans. They then immediately initiated refinance transactions, often in the same week and sometimes on the same day the original loan documentation was prepared. These refinanced loans were then sold to investors on the secondary market who were unaware that the initial loans were not funded. By engaging in the "portfolio loan" scheme, Loan Giant was allegedly able to-through false documentation-transform an otherwise non-conforming purchase money transaction into a refinance which was then ready for resale on the secondary market.

"The Cease and Desist Order outlines the allegations of fraudulent behavior in painstaking detail," said Watters. "OFIS investigators have methodically connected numerous allegations of wrongdoing to specific individuals and transactions."

Loan Giant is considered to be a large mortgage lender, with over 6,500 first and second mortgage loans processed in 2003 alone. OFIS investigators were tipped off to the allegedly illegal conduct by a series of consumer complaints about improper activities at Loan Giant.

"I applaud the consumers who took the time to call OFIS at (877) 999-6442 to file a formal complaint," said Watters. "Consumer tipsters played an important role in identifying specific instances where allegedly fraudulent behavior took place that form the basis of this enforcement action."

The Loan Giant headquarters at 26500 Northwestern Highway in Southfield also houses the offices of Title Giant; Appraisal Giant; and Credit Giant. Principal officers and owners of Loan Giant are Jack B. Wolfe, CEO; Andrew C. Jacob, President; Howard M. Babcock, CFO; and Robert S. Silverstein, COO.

According to news reports, Loan Giant has also been forced to repurchase a series of delinquent loans sold to GMAC Residential Funding Corporation (GMAC RFC). GMAC RFC also reportedly filed a lawsuit against World Wide Financial Services dba Loan Giant in the U.S. District Court in Minnesota in February, 2004 alleging that loans purchased from Loan Giant had a variety of problems from false employment data to inflated property values. World Wide's authority to make FHA loans was terminated by HUD effective June 29, 2004.

The Cease and Desist order may be viewed by clicking on http://www.michigan.gov/documents/world_wide_1st_mortgage_c_&_d_second_draft_101611_7.pdf