The U.S. Department of Justice and the Consumer Financial Protection Bureau announced at the end of December the opening of their first predatory mortgage lending case undertaken by developer Colony Ridge, the largest developer in Liberty County located northeast of Houston, Texas. The developer is accused of luring tens of thousands of Hispanic/Latino buyers through fake advertising spread mainly through Tik Tok and substandard housing as part of an illegal land scheme, NBC News reported.

The lawsuit names “Colony Ridge Development LLC, Colony Ridge Land LLC, Colony Ridge B.V. and Loan Originator Services LLC. Colony Ridge CEO John Harris said in a statement that developers were ‘caught off guard’ by the lawsuit”.

The lawsuit alleges that the development promised homeownership through Spanish-language advertisements, but subsequently led buyers to acquire properties without basic services, take out loans often incompatible with their financial capabilities, and fall victim to high-pressure sales tactics by exploiting buyers' limited English proficiency.

Colony Ridge CEO John Harris dismissed the allegations, calling the lawsuit “baseless and outrageous”. He stated that the business thrives on customer satisfaction, pointing out that the company provides loans to individuals who do not have access to loans from other financial institutions.

“Federal investigators found that Colony Ridge accounted for 92% of foreclosures in Liberty County between 2017 and 2022. Looking at three years preceding September 2022, investigators found that the developer had initiated foreclosure in at least 30% of seller-financed lots. During the foreclosure proceedings, Colony Ridge would buy the property for the outstanding loan price — and with any improvements that the customer had already paid for and completed”, according to Texas Tribune publication.

Also according to the Texas Tribune, “In all, thousands of Latinos were victims of the scheme, the government alleged — and Colony Ridge violated four federal laws surrounding fair housing, credit opportunities and consumer protections. The government is seeking injunctive relief to stop Colony Ridge’s practices, compensation for harmed consumers and penalties against the developer for the violations of federal laws. Asked at the news conference whether there was any criminal component, Assistant Attorney General Kristen Clarke said only that Wednesday’s action was a civil action”.

The case also raises questions about foreclosure practices, with the allegation that Colony Ridge buys properties back when families face financial difficulties, often reselling them at higher prices.

In addition, according to the Associated Press article, the Justice Department’s action aims to combat illegal discrimination and is related to the institution’s work in combating redlining, a practice of denying financial and other services to people because they live in certain neighborhoods, often with a predominance of Latinos, blacks, and low-income people.

The Colony Ridge development has developed “a set of subdivisions covering about 33,000 acres of land, 30 miles north of Houston”, according  to the Texas Tribune, which also drew national attention in late September last year due to unsubstantiated allegations that the site was a magnet for illegal immigrants and controlled by cartels, allegations that have been refuted by residents, local officials, and the developer’s CEO.

Such allegations were gathered and instructed by Greg Abbott as one of the topics discussed by lawmakers in the special third section to pass the bill that allows the state to spend up to $40 million for state troopers to patrol Colony Ridge.

Assistant Attorney General Kristen Clarke sought to reassure people who bought homes in Colony Ridge, according to NBC News: “I know you are hardworking people who are hoping to achieve the American dream of home ownership. Through this lawsuit we are seeking to compensate those who have suffered losses due to these predatory practices”.