There is an interesting statistic over mortgages in Queens

One person can be blamed for bursting the bubble – Lloyd Varma. He defaulted on 20 mortgages for 10 properties in Queens.

Only 3 years previously Varma appeared to be an ordinary citizen displaying no opulence for the outsider. But he managed to persuade 10 banks to grant him 20 mortgages to purchase 10 houses stretched across Queens (south).

All this was done within a mere 51 days just prior to the housing collapse. Without making any down payment he took $6.4 million as loans!

Then the inevitable happened – he defaulted one by one on each of the loans and as 2007 drew to a close 8 of his houses had been foreclosed upon. It meant that the adjacent houses saw the value of their properties falling. Currently the banks have repossessed 4 of these units while the others are running through the foreclosure course.

The story of the failure and success of Varma focuses on the dangerous defect in the system. The banks were literally blind when then handed over loans to many like Varma without checking on them thoroughly. Their activities caused a rippling effect to run through the entire economy. Weighed down with millions in delinquent loans the banks had no other route open to them but to cease lending; credit froze.

Foreclosures pulled down neighbouring property values of those who had never defaulted. The tenants in foreclosed homes found themselves suddenly shelter-less for no fault of theirs.

Josh Zineer of Neighborhood Economic Development Advocacy Project said, “There weren’t any checks on whether mortgages were affordable or viable, so sub-prime lenders were writing these mortgages because they could sell them to Wall Street.” He referred to the incident of Varma as “an egregious example of something that was rampant all over the city.”

Analysts say that Varma could purchase the houses in such a short period because for each unit he went to different banks. The latter were not aware of this. This has posed the question about what Varma disclosed about his liabilities.

Sometime in 2008 Varma filed bankruptcy in which he listed only 3 of his 10 properties.

Currently Varma is not accepting phone calls and refuses to talk. Nan Bedsi, his attorney also failed to make any comment and said, “I don’t have to answer your questions.”

Varma wildly started purchasing houses from 30th November 2006 to 19th January 2007 – immediately prior to the burst.

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