The Consumer Financial Protection Bureau (CFPB) and the Justice Department sued Colony Ridge, a Texas-based developer and lender, for allegedly “operating an illegal land sales scheme and targeting tens of thousands of Hispanic borrowers with false statements and predatory loans.”
The lawsuit filed in federal district court “alleges Colony Ridge sells unsuspecting families flood-prone land without water, sewer, or electrical infrastructure, and that the company sets borrowers up to fail with loans they cannot afford.”
Roughly 1-in-4 Colony Ridge loans “ends in foreclosure, after which the company repurchases the properties and sells them to new borrowers.”
The CFPB and Justice Department are “seeking redress for borrowers harmed by Colony Ridge and an immediate end to its illegal practices. This is the CFPB’s first federal court lawsuit charging a defendant with violations of the Interstate Land Sales Full Disclosure Act.”
CFPB Director Rohit Chopra said:
“The CFPB and Justice Department lawsuit in federal court charges Colony Ridge with a slew of illegal misconduct and seeks to stop this set-up-to-fail scheme that has led thousands of families to lose their dreams of homeownership. Our investigation uncovered that Colony Ridge is baiting borrowers with lies, saddling families with predatory loans for homesites that the company knows have repeatedly flooded with raw sewage and lacked basic utility infrastructure.”
Attorney General Merrick B. Garland said:
“Today’s complaint alleges that Colony Ridge targeted Hispanic consumers with predatory loans, misled borrowers about the water, sewer, and electrical infrastructure on its lots, and exploited language barriers by conducting most of its marketing in Spanish while offering important transaction documents only in English. Discrimination in lending harms families and neighborhoods for generations, it is wrong, and it has no place in our country. That is why I launched the Department’s Combating Redlining Initiative more than two years ago and why we remain steadfast in our commitment to continue this work.”
Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division, said:
“Colony Ridge promised the American dream, but we allege that in reality, it has delivered a nightmare for thousands of hardworking Hispanic families who hoped to build their homes in the Terrenos Houston community. This lawsuit demonstrates our commitment to holding accountable those in the housing and financial industry who intentionally target and exploit homebuyers because they are Hispanic or don’t speak English well. Through our Combating Redlining Initiative, the Justice Department will aggressively continue to dismantle predatory, deceptive and unfair lending practices to safeguard the rights of all who seek to buy a home.”
The lawsuit names “as defendants three Texas-based Colony Ridge affiliate companies, as well as Loan Originator Services, a nonbank mortgage company licensed to originate loans in Texas. Colony Ridge has developed more than 40,000 lots spread across an unincorporated area of Liberty County, Texas, approximately 30 miles northeast of Houston. Colony Ridge markets these subdivisions using the names ‘Terrenos Houston’ and ‘Terrenos Santa Fe.'”
The complaint alleges that Colony Ridge “has lured tens of thousands of Hispanic consumers into their predatory loan products. Foreclosure and property deed records from September 2019 through September 2022 show that Colony Ridge initiated foreclosures on at least 30% of seller-financed lots within just three years of the purchase date, with most loan failures occurring even sooner. Records also confirm that Colony Ridge accounted for more than 92% of all foreclosures recorded in Liberty County between 2017 and 2022.”
For more details, check here.