Developer has had legal woes

Monday, September 29, 2008
By CHARLES HACK
JOURNAL STAFF WRITER

Michael Pazden, director of construction for the Harbor Lights development on First Street, has a checkered past.

In June 1996, Pazden was convicted of theft by deception and other charges in state court after more than 40 purchasers of homes at an un-built condominium complex in Clifton filed criminal charges against him and his brother for failing to return deposits collected during 1989 and 1990, according to court papers.

Pazden served four years in prison and was released on parole in December 2000, according to the state Department of Corrections Web site.

But in 2005, Pazden's conviction was overturned after a federal appeals court found that a state court had violated his constitutional rights to a fair trial, according to court documents. Pazden was granted habeas corpus relief by the U.S. Court of Appeals for the Third Circuit.

The court ruled the state trial court had violated his Sixth Amendment rights guaranteeing him "assistance of counsel" for his defense.

Pazden said he was forced to defend himself after his overburdened public defender failed to investigate the complex case properly and the court refused to provide her enough time to do so.

He also accused the Passaic County Prosecutor's Office, which prosecuted the case, of foot-dragging when it came to providing evidence during the discovery process.

Passaic County Chief Assistant Prosecutor Steven E. Braun said although his office did not agree with the 2-to-1 findings by the Appeals Court to overturn Pazden's conviction, they did not appeal the complex case to the Supreme Court because Pazden had already served his time.

Court papers said the development corporation, owned wholly by Pazden's brother Robert Pazden, failed because of financial difficulties that prevented the condos from being built. Some 200 other buyers did receive their deposits back, court papers said. Officials couldn't say what became of Robert Pazden.

Michael Pazden, who works for Who Land & Development, LLC, a company set up to obtain project approvals, says he has no investment interest in any of the companies created to develop Harbor Lights.

Pazden characterized writing about his previous conviction as "very unfair."

GUARANTEED LOAN?
Harbor Lights offers novel mortgage help

Monday, September 29, 2008
By CHARLES HACK
JOURNAL STAFF WRITER

With the subprime mortgage meltdown rattling the entire U.S. economy, a novel loan program on the part of a Jersey City developer that allows new condo purchasers to avoid paying the full cost of their mortgages right away - by borrowing money from the developer- is causing concern among some analysts.

But the developer of the 153-unit Harbor Lights condominium project at 160 First St. in Downtown insists his offer is a safe way for customers to afford the home of their dreams.

The developer - Waldo Jersey City LLC - is offering buyers loans of up to 10 percent of the purchase price to help pay principal and interest on a conventional mortgage during the first five years of ownership, said Michael Pazden, director of construction for the Harbor Lights developer.

This is money the would-be homebuyer wouldn't be able to borrow from conventional banks because banks don't lend more than a house is worth.

But Pazden is confident that property values will rise enough to cover the principal and interest that accrues during the life of the so-called "Guaranteed Appreciation Mortgage" loan.

When the loan becomes due in five years, the buyer refinances it and the new repayments are paid on top of the updated mortgage, he explained.

Market-rate units at Harbor Lights are expected to begin selling for between $600,000 and $1.2 million next year, and range from 900 square feet up to a maximum of 2,350 square feet, he said.

Pazden says the buyer can either go to a bank or refinance with the developer at the prevailing interest rate.

The developers are so confident the condo's value will appreciate that they are prepared to forgive any shortfall in equity - meaning, if the buyer owes the developer $90,000 and the unit has only increased in value by $40,000, the developer will forgive the $50,000 shortfall, Pazden said.

Pazden said the contract stipulates the developer would hire an appraiser who is a member of the Appraisal Institute to value the condo after five years.

If the condo owner disagrees with the appraisal, they can hire their own appraiser. If the two parties are unable to agree on a value, the developer has the option to buy the property back at the lower appraisal.

Mike Mundy, a Hoboken-based mortgage broker, says the offer makes sense for developers because although they bear the risk, it beats slashing sales prices.

"The builder is taking a risk by giving homeowners secondary financing that they may not recoup," Mundy said. "If the marketplace does appreciate over the next five years, the builder winds up getting the price they initially anticipated."

But some analysts warned that in a faltering economy, with looming interest hikes and job market uncertainty, buyers should beware.

Jeff Klapowitz, a former chair of the Jersey City Planning Board and member of the Liberty Board of Realtors, cautioned that buyers may be lured into loans they will not be able to afford when they go to re-mortgage their condo.

"This to me is a dangerous proposition that is equivalent to a subprime mortgage by getting people into properties they cannot afford," Klapowitz said. "The assumption is that everything goes up and there are no bumps in the economy."

Pazden bristles at any comparison with the subprime mortgage, saying his borrowers are young professionals whose salaries are on the rise.