The Serious Fraud Office has launched an investigation into an alleged mortgage fraud at two former branches of Wizard Home Loans.
The company closed down in December because of the credit crunch, and parent company GE Money is now servicing the $1 billion of mortgages.
Serious Fraud Office director Grant Liddell says the office is investigating the Lower Hutt and Henderson branches of Wizard Home Loans.
It is alleged the branches inflated property values and the equity of borrowers, and wrote false documents worth tens of millions of dollars.
The Serious Fraud Office was alerted when GE Money closed Wizard Home Loans.
Mr Liddell says the alleged fraud is substantial, and GE Money and a trading bank appear to be the known victims.
It is expected to be some months before the investigation is concluded.