Date: December 20, 2023

The U.S. Department of Justice (DOJ) has filed a lawsuit against Colony Ridge, a Houston-area developer, alleging fraudulent lending practices aimed at Latino buyers in rural Liberty County. The lawsuit, which echoes the findings of a recent investigation by Houston Landing, accuses Colony Ridge of using false statements and predatory loans to deceive tens of thousands of Latino buyers.

According to the lawsuit filed in the Southern District of Texas on Wednesday, Colony Ridge targeted Hispanic consumers with predatory loans and misled borrowers about the infrastructure on its lots. The company allegedly exploited language barriers by conducting most of its marketing in Spanish while providing important transaction documents only in English. The federal government argues that such discriminatory lending practices have no place in the country and violate several federal laws, including the Equal Credit Opportunity Act, the Fair Housing Act, the Consumer Financial Protection Act, and the Interstate Land Sales Full Disclosure Act.

In response to the lawsuit, Colony Ridge CEO and President, John Harris, called the allegations baseless and inflammatory, stating that the company's business thrives on customer referrals. Harris defended the company's practice of offering land to buyers with limited credit history, claiming that it creates opportunities where there are none. However, federal officials maintain that Colony Ridge continuously fails to assess borrowers' ability to repay the credit, contributing to an "extraordinary" foreclosure rate.

The lawsuit also reveals a bait-and-switch land sale scheme employed by Colony Ridge, where the developers allegedly targeted potential buyers with advertising primarily in Spanish. These advertisements, featuring Latin American flags and regional music, enticed vulnerable Latino borrowers with minimal down payments and above-average interest rates. According to federal officials, this resulted in an "extraordinary" foreclosure rate, with at least 30 percent of all seller-financed lots sold between 2019 and 2022 being foreclosed on within three years of purchase.

The consequences for homeowners have been devastating, with thousands of individuals having their dreams of homeownership stripped away. According to an investigation conducted by Houston Landing, an unusually high turnover rate of properties in Colony Ridge indicated a predatory lending scheme. The developer routinely sold and financed properties to buyers with little to no down payment and charged interest rates as high as 12.9 percent, more than double the typical mortgage rate. The foreclosure rate in Colony Ridge reached 11.3 percent in 2022, approximately 50 times higher than the national average.

To address these issues, the federal government is seeking to halt Colony Ridge's lending practices, provide relief for those affected, and impose a civil penalty on the developers. The DOJ encourages anyone who believes they have been harmed by Colony Ridge to contact their Housing Discrimination hotline or email the designated address.

This article was originally published on Houston Landing and is republished here under a Creative Commons license.