The Justice Department and the Consumer Financial Protection Bureau have filed a lawsuit against a Texas developer, alleging that they specifically targeted Hispanic consumers with predatory lending practices, misleading advertising, and inferior housing in an unlawful land deal.
“Using 21st century social-media applications to target and mislead consumers, Colony Ridge set out to exploit something as old as America – an immigrant’s dream of owning a home,” said U.S. Attorney Alamdar S. Hamdani for the Southern District of Texas. “As alleged in the complaint, Colony Ridge’s exploitative practice began with misleading advertising on platforms like TikTok and often ended with families facing economic ruin, no home and shattered dreams."
The federal civil complaint against the Houston-area developer said it advertises almost exclusively in Spanish, often in TikTok or other social media posts featuring, for example, national flags and regional music from Latin America.
The complaint alleges that Colony Ridge 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. Nationally, 2.1% of home loans originated in 2019 became delinquent by 60 days or more within three years of origination.
Records, according to federal authorities, also confirm that Colony Ridge accounted for more than 92% of all foreclosures recorded in Liberty County between 2017 and 2022.
Colony Ridge’s chief executive John Harris said Wednesday he was “blindsided” by the lawsuit, which he called “baseless and both outrageous and inflammatory.”
“Our business thrives off customer referrals because landowners are happy and able to experience the American Dream of owning property,” Harris said in a statement distributed by a spokesperson. “We loan to those who have no opportunity to get a loan from anyone else and we are proud of the relationship we have developed with customers. We look forward to telling the true story of Colony Ridge.”
According to the complaint, since at least 2016, Loan Originator Services, LLC, which is also named as a defendant, has originated all of Colony Ridge’s seller-financed mortgages. Under this arrangement, Colony Ridge Land is still recorded as the lender on filings with the Liberty County Clerk and services the seller-financed loans, in addition to retaining the notes and the right to foreclose on the properties.
"Like Colony Ridge, Loan Originator Services fails to assess borrowers’ ability to repay and does not request proof of income or liabilities from borrowers," the complaint states.
It goes on to explain that Colony Ridge profits from its seller-financed mortgages by charging high interest rates and imposing late fees when consumers lag in their payments. Additionally, they accrue income from down payments, mortgage payments, and other fees for land that is often not viable for the consumers' use. Rather than working with customers to establish remedial payment plans or discuss refinancing options, Colony Ridge frequently imposes monthly late fees, exacerbating the borrowers' challenges in repaying their loans. This practice leads to loan defaults, which then allows Colony Ridge to engage in property "flipping." This flipping involves repurchasing properties in foreclosure and reselling them, often at increased prices, resulting in more down payments, fees, and mortgage payments on even larger debts for new consumers.
According to foreclosure and property deed records, between September 2019 and June 2023, Colony Ridge flipped at least 40% of all properties it sold, with 8,237 properties being sold twice, 3,267 properties sold three times, and 2,067 properties sold four or more times.
“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,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “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.
The Colony Ridge neighborhoods also caught the attention of Texas Gov. Greg Abbott and the Republican-led Legislature following claims by right-wing media outlets that they attract undocumented immigrants and are rife with crime. While no legislation to address the practices of the company were ever passed, the Texas legislature passed a bill authorizing up to $40 million for state trooper patrols in the Colony Ridge area.
