He Burst the Bubble! Real Estate Speculator Lloyd Varma Defaulted on 20 Loans for 10 Queens Homes

Robert Gearty, New York Daily News, December 27, 2009

Lloyd Varma is a miracle man for all the wrong reasons. He’s accused of convincing 10 banks to fork over about $6.4 million in home loans to him–without putting any money down.

Three years ago, Varma, a man of no visible wealth, convinced 10 different banks to hand him 20 separate mortgages to buy 10 homes across southern Queens.

Amazingly, he did this in 51 days just before the housing market collapsed–getting loans for $6.4 million with no money down.

Then, one by one, Varma defaulted on each loan, and by the end of 2007, eight of the homes were in foreclosure–a kiss of death to a neighborhood’s property values.

Today, banks own four of the houses, while the others are in the process of being foreclosed.

Varma’s trail of wreckage highlights a fatal flaw in the system: Banks blindly handed over money to borrowers like Varma without thoroughly checking them out.

Buyers like Varma who got in way over their heads caused a ripple effect throughout the economy. Saddled with millions of dollars in bad loans, banks stopped lending.

Foreclosures dragged down property values for neighboring homeowners who never got behind in their payments–and tenants in foreclosed homes found themselves out on the street.

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Zinner said Varma’s ability to get so many mortgages so quickly raised questions about what Varma disclosed about his liabilities on his mortgage applications.

At one point last year, Varma filed for bankruptcy, listing only three of his properties–not the 10 he owned.

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The properties–nine two-family homes and one one-family–are in poor, predominantly minority sections of three Queens neighborhoods with some of the worst foreclosure numbers in the city: Richmond Hill, Jamaica and Ozone Park.

Varma got two loans per property–one for the down payment, one for the rest. The dual-loans ranged from $570,000 to $700,000 per house and came from subprime lenders that would go bust when the housing bubble burst.

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Around Christmas 2006, Varma went into overdrive. Twice, on Dec. 18 and then again on Dec. 26, he bought two homes in one day, records show.

Though the bank collapse may have been a nightmare for Varma, it was worse for some of his tenants. Varma has stopped paying for utilities in some houses, leaving tenants to pay the bills.

Even though he has not paid the mortgage, Varma is trying to evict tenants for not paying rent. Just this month, he served eviction papers on families living in two of his foreclosed homes: 107-22 113th St. and 107-28 113th St.

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Varma lives in Schenectady in a house he bought with a $100,000 mortgage in February 2007. In 2008, he deeded the property to a relative.

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Varma

The hands and forehead of Lloyd Varma.

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