Toren seeks FHA financing, closings expected
The developer of Toren, the long-awaited condominium at 150 Myrtle Avenue in Downtown Brooklyn, has applied for Federal Housing Administration financing and is scheduled to begin closings by the second week of December, officials said.
FHA financing, if approved, would help individual buyers close their apartment contracts, with low down payments and less-than-perfect credit scores, said Roberta Benzilio, executive director of sales in Brooklyn for Halstead Property, exclusive broker for Toren.
“I think the FHA approval will help with the buyers who were initially only looking to put 10 percent down,” Benzilio said. “Some people don’t have the cash available.”
The FHA program allows new homebuyers to finance up to $729,750 for a new home. The buyers only need a 3.5 percent down payment compared to 20 percent or more required for most bank loans in the current market.
In November, the FHA eased guidelines for loan guarantees at condos, lowering the FHA pre-sale requirements for new condo buildings to 30 percent from 50 percent. By comparison, Fannie Mae requires buildings to have 70 percent of the building’s units under contract.
BFC Partners launched sales at the 240-unit property in early 2008 amid a boom in new development in Downtown Brooklyn that included the Forte and Oro. However, the Forte collapsed and has been taken over by lenders and the Oro just launched a rent-to-own program.
Downtown Brooklyn was one of the first submarkets hurt in the September 2008 credit crisis, with average prices falling to $760,000 in the second quarter 2009 from $830,000 in the first quarter of the year, according to Brooklyn-based appraisal firm HMS Associates.
Benzilio said that half the units at the Toren have signed contracts. Prices range from $320,000 for a 449-square-foot studio to $1.66 million for a 1,967-square-foot penthouse. She says the Toren has avoided much of the price cutting seen at other buildings, and that appraisals have held firm at the building.
“We priced it right in the first place,” she said. “The value is there and even our appraisals are close to the asking price.”
But, at least half dozen buyers at Toren have filed lawsuits in the U.S. District Court in Brooklyn to get out of their contracts, employing the Interstate Land Sales Disclosure Act, frequently used to back out of contracts.
According to court records obtained by The Real Deal, lawyers for the developer have taken depositions of some of the buyers. The defense lawyers have argued that ILSA, originally enacted to protect Florida vacation property scams, does not apply to New York condos and argued that the buyers learned of the Toren through real estate brokers, not through Internet listings or other interstate mail or marketing material, which is required under the ILSA law.
Lawrence Weiner, the attorney for three of the plaintiffs, counters that a 1989 case in the Southern District of N.Y., proves that ILSA applies to New York condos.
Benzilio said that some buyers have dropped their ILSA claims against the Toren, and court records show at least one case been dropped. Weiner said that plaintiff decided to close.