It is now official - not only does Indiana have the highest mortgage foreclosure rate in the country but the New York Times is reporting that Robert Penn of Indianapolis "perpetrated one of the largest mortgage frauds in American history, victimizing dozens of [Virginia] residents and, according to sources with knowledge of the accusations, at least $40 million in fraudulent loans - perhaps even twice that amount" - on properties in Indianapolis.
The Indianapolis Star is reporting that Countrywide has filed suit in Marion County:
Among the false representations, the suit says, was that the investment properties would not require down payment or cash contributions of any kind.
The scheme has left as many as 400 Indianapolis-area properties in default.
Stories in The New York Times and the Wall Street Journal today say the case involves an investment group organized by Penn.
Countrywide Home Loans, Inc., a New York corporation licensed to do business in Indiana, claims Penn - working with his mother and sister in Virginia - obtained tens of millions of dollars in bogus loans by submitting false mortgage applications and inflated appraisals to lenders.
The Countrywide lawsuit says companies associated with the Penns acquired houses and then quickly resold them for much higher prices to borrowers in Martinsville, Va., allegedly recruited by Penn's mother and sister, who live in the town of 14,925. That allowed the Penns and associates to profit from the quick sale while leaving the people in Martinsville stuck with loans they couldn't pay, the suit says.
The working men and women in Virginia will not be the only persons injured by the alleged actions of the Penns. Apparently, most of the 400 homes in default are in lower income Indianapolis neighborhoods which means these vacant houses will continue to be vacant, drawing crime, weeds and other problems to already struggling neighborhoods.
This is not the first time such a scam has surfaced in Indianapolis. Yet despite the prior incidents, we have obviously not taken very effective steps to deal with the problem. Our predatory lending statutes are a starting point but as a lawyer who is currently working on a case involving mortgage fraud and questionable lending practices, I can tell you that Indiana law does not nearly go far enough.
It is time for Indianapolis and Indiana to take action and decide how we are going to address the growing problems with predatory lending and mortgage fraud or else the number of empty houses festering illegal activities in our neighborhoods is going to continue to grow.