The Serious Fraud Office is investigating two branches of home loan company Wizard for alleged mortgage fraud.
Investigations into the Henderson and Lower Hutt branches have started after complaints from Wizard's parent, the finance company GE Money.
It is alleged that former owner-operators of the branches gave forged loan documentation to GE and a trading bank.
The SFO says the documents inflated the value of properties, the financial situation of the borrowers and the size of their deposits.
The investigations involve several hundred loans worth tens of millions of dollars.
SFO director and chief executive Grant Liddell said the agency needed to establish the extent of the situation.
"The alleged offending is serious and there may be a large number of people to interview and numerous documents to identify, collect and analyse," he said. "We expect the investigations to take some months."
As financiers of the Wizard loans, GE Money and the trading bank are victims of the alleged fraud.
Once promoted by former All Black Grant Fox, Wizard at its peak had 45 outlets around the country.
Last month GE said it was closing Wizard New Zealand because of the effects of the credit crisis and the state of the housing market.
It subsequently sold the Wizard operation in Australia.
At the time it said the Henderson, Lower Hutt, Palmerston North and Chinese Language branches had been closed because of breaches of policy.
Yesterday, spokesman Tristan Everett said the Palmerston North and Chinese Language operations were closed for breaches of agreements not related to alleged fraud.
A former employee told the Herald some Wizard branches had a "cowboy culture", with "rampant over-declaration" of customers' incomes enabling them to qualify for loans.
Wizard wrote a lot of "lo-doc" loans - loans that are supposed to be for self-employed people who can't provide financial statements.
But in many cases the customers weren't self-employed and the company "knew it, or at least suspected it", the ex-employee said.
"As long as people were writing business they'd look the other way.
"There were people with bad credit, poor properties, self-certifying income that really couldn't afford the loans."
It was only when the business climate turned sour that a clamp-down came, the former employee claimed.
Tristan Everett said irregularities were discovered during GE Money's normal review process, and the branches were immediately closed.
"The two licensees ... are out of a total of more than 100 licensees and mobile managers," he said.
He said the alleged fraud had nothing to do with the company's decision to close the New Zealand Wizard business.
Wizard and GE are continuing to service existing home loan customers.
PARENT COMPANY ACCUSES BRANCHES
* GE Money alleges the Henderson and Lower Hutt branches of Wizard Home Loans forged mortgage documents.
* The Serious Fraud Office is investigating.
* It says several hundred loans worth tens of millions are involved.
* GE owns Wizard, but is closing the New Zealand business.
* GE is owned by giant American corporate General Electric.