Loan Giant loses its Mich. license
Tuesday, May 23, 2006
Mortgage lender admits to nearly a dozen types of improper or illegal lending practices.
Brian J. O'Connor / The Detroit News
The parent company of troubled sub-prime mortgage lender Loan Giant has lost its license to make loans in Michigan and has been slapped with more than $273,000 in fines and investigative costs by the state's Office of Financial and Insurance Services.
According to a bulletin from the Gongwer News Serivce, Southfield-based World Wide Financial Services Inc. has agreed not to contest the fines and admitted to engaging in nearly a dozen types of illegal or improper lending practices.
Those violations include providing false data on loan applications, transmitting improper payoff information, failing to maintain proper record of loan applications, failure to properly notify borrowers of loan denials, failure to maintain sufficient escrow funds and failure to provide annual statements of borrower accounts for loans it serviced.
"Loan Giant was a super-sized bad actor," Commissioner Linda A. Watters said. "Their illegal activities eventually caught up with them."
In September 2004, the office ordered World Wide to stop violating Michigan law and to stop engaging in fraud, deceit or material misrepresentation in connection with mortgage lending. The orders followed an investigation prompted by consumer complaints to the state.
The investigation uncovered "phantom" loan transactions that involved home purchase mortgages that did not conform with the requirements for resale in the secondary market. Instead of issuing the mortgages, Loan Giant would immediately refinance the loans and sell them to lenders who didn't know the original mortgages had never been granted.
At the time, Loan Giant was one of the state's larger mortgage lenders, having processed more than 6,500 first and second mortgage loans in 2003. The sub-prime market for mortgages charges higher-than-normal interest rates to borrowers with tarnished or badly damaged credit. Critics say the loans can be "predatory," and often include onerous charges and conditions, including high costs and prepayment penalties.
Previously, Loan Giant had been forced to repurchase delinquent loans sold to GMAC Residential Funding Corp. GMAC reportedly sued World Wide in February 2004, alleging that loans purchased from Loan Giant contained false employment data on borrowers and inflated property values. World Wide's authority to make FHA loans was terminated by HUD effective June 2004.
According to state documents, Loan Giant is headquarted on Northwestern Highway in Southfield. Principal officers and owners of Loan Giant are Jack B. Wolfe, chief executive officer; Andrew C. Jacob, president; Howard M. Babcock, chief financial officer; and Robert S. Silverstein, chief operating officer. At one time, the company had as many as 265 employees and spent up to $350,000 a month in advertising, according to published reports.
After losing its ability to fund loans through GMAC and after being hit with the state's cease and desist order, World Wide was sued in 2005 by another creditor, GE Commercial Finance Business Property Corp., and filed for Chapter 11 bankruptcy protection in October 2005, claiming assets of no more than $10 million but with debts of as much as $50 million.
At the time, Wolfe issued a statement that said the problems were "basically the result of the actions of a few bad actors who are no longer with us. The bad actors operated independent of the Company, without our knowledge."
Tuesday, May 23, 2006
Mortgage lender admits to nearly a dozen types of improper or illegal lending practices.
Brian J. O'Connor / The Detroit News
The parent company of troubled sub-prime mortgage lender Loan Giant has lost its license to make loans in Michigan and has been slapped with more than $273,000 in fines and investigative costs by the state's Office of Financial and Insurance Services.
According to a bulletin from the Gongwer News Serivce, Southfield-based World Wide Financial Services Inc. has agreed not to contest the fines and admitted to engaging in nearly a dozen types of illegal or improper lending practices.
Those violations include providing false data on loan applications, transmitting improper payoff information, failing to maintain proper record of loan applications, failure to properly notify borrowers of loan denials, failure to maintain sufficient escrow funds and failure to provide annual statements of borrower accounts for loans it serviced.
"Loan Giant was a super-sized bad actor," Commissioner Linda A. Watters said. "Their illegal activities eventually caught up with them."
In September 2004, the office ordered World Wide to stop violating Michigan law and to stop engaging in fraud, deceit or material misrepresentation in connection with mortgage lending. The orders followed an investigation prompted by consumer complaints to the state.
The investigation uncovered "phantom" loan transactions that involved home purchase mortgages that did not conform with the requirements for resale in the secondary market. Instead of issuing the mortgages, Loan Giant would immediately refinance the loans and sell them to lenders who didn't know the original mortgages had never been granted.
At the time, Loan Giant was one of the state's larger mortgage lenders, having processed more than 6,500 first and second mortgage loans in 2003. The sub-prime market for mortgages charges higher-than-normal interest rates to borrowers with tarnished or badly damaged credit. Critics say the loans can be "predatory," and often include onerous charges and conditions, including high costs and prepayment penalties.
Previously, Loan Giant had been forced to repurchase delinquent loans sold to GMAC Residential Funding Corp. GMAC reportedly sued World Wide in February 2004, alleging that loans purchased from Loan Giant contained false employment data on borrowers and inflated property values. World Wide's authority to make FHA loans was terminated by HUD effective June 2004.
According to state documents, Loan Giant is headquarted on Northwestern Highway in Southfield. Principal officers and owners of Loan Giant are Jack B. Wolfe, chief executive officer; Andrew C. Jacob, president; Howard M. Babcock, chief financial officer; and Robert S. Silverstein, chief operating officer. At one time, the company had as many as 265 employees and spent up to $350,000 a month in advertising, according to published reports.
After losing its ability to fund loans through GMAC and after being hit with the state's cease and desist order, World Wide was sued in 2005 by another creditor, GE Commercial Finance Business Property Corp., and filed for Chapter 11 bankruptcy protection in October 2005, claiming assets of no more than $10 million but with debts of as much as $50 million.
At the time, Wolfe issued a statement that said the problems were "basically the result of the actions of a few bad actors who are no longer with us. The bad actors operated independent of the Company, without our knowledge."
posted by Ralph Marcus (Mark) Maupin | 3:26 PM
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