Carl Brizzi for Prosecutor

An Eastside neighborhood already on its knees now finds itself in the middle of an alleged multistate mortgage scheme.

Some who live there call it a ghost town.

But it's not just the Eastside. The alleged scheme sent an untold number of townhomes in affluent Westfield into foreclosure, too.

The nation's largest home lender, Countrywide Home Loans Inc., is blaming a Fishers businessman for masterminding what they describe as an elaborate scheme that duped lenders and investors alike. As a result, some neighborhoods became filled with foreclosed houses.

In a lawsuit filed in Marion Superior Court, Countrywide accuses Robert Penn, 50, of running a wide-ranging mortgage fraud scheme in which dozens of Virginia residents were tricked into buying houses and town homes at inflated prices in Indianapolis and Westfield. The suit lists 112 properties, but other reports put the number closer to 400 and the losses between $40 million and $80 million.

The borrowers, according to the lawsuit, were led to believe they were participating in a risk-free "investment opportunity."

To accomplish this, Countrywide said in its suit, Penn recruited a dizzying collection of relatives, corporate entities, appraisers, lenders, loan officers and bank accounts. There are 15 defendants named in the lawsuit, and Countrywide, in its 11-count lawsuit, is demanding triple damages from them.

Authorities, including the Marion County prosecutor's office, are investigating the claims in the suit.

In Penn's own neighborhood -- on the 7500 block of Easy Street in Fishers -- neighbors and business acquaintances said they know little about the man.
No one answered the door Thursday afternoon at Penn's house.

Neighbor Chad Hoover said Penn and his wife, Tamara E. Scott-Penn, owned a few properties in the neighborhood, including the house next door to him, which they rented out.

Penn and his wife couldn't be reached for comment. Calls to their Downtown office on Delaware Street weren't returned. A sign outside the empty office instructed Showhomes Properties visitors to call a toll-free number or send mail to a post office box.

At Penn's previous office location on Bash Street, the signs of Penn's occupancy are long gone. But a copy of the lawsuit lay on a bin at the front desk.

Lawsuit detail allegations

According to the lawsuit, filed by New York-based Countrywide, the scheme went like this:

As early as May 2005, one of Penn's companies, Land Economics, scoped out properties in Central Indiana and got purchase agreements from their owners.
Penn's mother, Beulah Penn, and sister Sharon then signed up long-time friends in Virginia and North Carolina to unwittingly purchase the homes. And Penn's wife ran a company that was supposed to find renters to make the payments on the homes, which it rarely did.

The fraud required deception on two fronts, Countrywide said: getting unsuspecting people in Virginia to buy homes without knowing it and getting mortgage lenders to lend far more money than each home was worth.

To dupe the buyers, the suit alleges that Penn's mom and sister recruited potential buyers, checked out their credit and rushed them through the signing of loan documents. They required no payments from these buyers, promised them cash payments in return and assured them that they would not own these homes or be liable for the mortgage payments.

But the buyers were liable. And the documents they signed were key for the Penns to convince Countrywide to shell out hundreds of thousands of dollars, Countrywide claims.

That second part of the scheme hinged on Robert and Amy Pollard, loan officers for People's Choice of Kentucky, according to Countrywide's lawsuit. The Pollards' attorney did not return a call for comment.

People's participated in a program with Countrywide called correspondent-lending, in which Countrywide promised to quickly buy newly written mortgages, so long as they were written according to predetermined guidelines. Such mortgages accounted for about 38 percent of Countrywide's $296 billion in residential lending during the first eight months of this year.

The Pollards got loans to cover 80 percent of the home purchase by submitting documents that showed the buyers had access to cash in bank accounts that would cover the remaining 20 percent. In reality, those bank accounts at Union Federal and National City banks were controlled by Robert Penn, Countrywide claims.

For Penn to make the operation profitable, he got three Indianapolis-area appraisers to say the homes were worth more than what Penn paid to acquire them, Countrywide claims.

Ace Appraisal Services of Greenwood, Pinnacle Appraisal Services and Bauter Appraisal Services all participated in Penn's scheme, Countrywide claims. Those companies did not return calls seeking a comment.

Countrywide discovered the scheme, it says, because it noticed so many homes in the same three neighborhoods going into early default.

Company says home value inflated

Countrywide hired its own appraiser to evaluate each of the homes involved in the Penn case. According to those numbers, the values of the 112 homes were inflated from $30,000 to $84,000 apiece.

Because Countrywide was lending 80 percent of the inflated value, it left enough cushion for Penn and his associates to make a profit.

Many of the houses were never occupied by renters, and still aren't. Most of the buyers never made a payment on the homes.

In a statement issued Thursday, Countrywide reiterated its zero-tolerance policy against fraud.

"In short," it said, "Countrywide strongly believes that mortgage fraud must carry swift and harsh consequences."

The consequences have been steep for some residents in Martinvsille, Va., a depressed town where Penn grew up. That's where his mother and sister are accused of approaching potential investors.

Duped into buying houses

Kelvin Thompson, 44, said Sharon Penn, a long-time family friend, persuaded him to sign up for what she called an investment "partnership." He turned her down at first.

"What swayed me is she said: This a government-funded program," said Thompson, an hourly worker at the Goodyear Tire & Rubber Co. "The money is guaranteed to be made."

To his surprise, Thompson now owns five houses in Indianapolis, two of which have gone into foreclosure.

Timothy Jacobs, another Martinsville man who says he was taken by the Penns, said he has two houses here in his name. Both are in foreclosure. He knows plenty of people in the same boat.

"A lot of people are very mad," he said. "Down here, we can't buy a stick of bubble gum until they run our credit."