The Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Justice (DOJ) have filed a lawsuit against the Texas-based developer and lender Colony Ridge, accusing the company of operating an illegal land sales scheme targeting tens of thousands of Hispanic borrowers with false statements and predatory loans.
According to the lawsuit filed in federal district court, Colony Ridge allegedly sold flood-prone land without water, sewer or electrical infrastructure to unsuspecting families and also set up borrowers with loans they cannot afford. Roughly one-quarter of Colony Ridge loans ends in foreclosure, after which the company repurchases the properties and sells them to new borrowers, the lawsuit added.
The lawsuit names three Texas-based Colony Ridge affiliate companies as defendants, 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, and it markets these subdivisions using the names “Terrenos Houston” and “Terrenos Santa Fe.”
The CFPB and DOJ are seeking to put a stop to Colony Ridge’s business practices and to redress the borrowers impacted by their dealings with company. This is the CFPB’s first federal court lawsuit charging a defendant with violations of the Interstate Land Sales Full Disclosure Act.
“The lawsuit filed in federal court by the CFPB and the Justice Department 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,” said CFPB Director Rohit Chopra. “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.”
“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 DOJ’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. 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.”
Colony Ridge’s executives have not publicly commented on the lawsuit.
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