Washington — A Texas-based housing developer and mortgage lender is accused of targeting members of the Houston area’s Hispanic community by offering loans to people who could not pay them back, selling them land in disrepair and taking advantage of language barriers.

Prosecutors allege Colony Ridge Development, LLC, and its subsidiaries carried out a predatory lending scheme in which foreclosures were part of the business model, according to a federal lawsuit filed Wednesday. 

The developers — who handled over 40,000 lots across 33,000 acres — were sued by the Justice Department Wednesday in what was the first effort by civil rights prosecutors to confront predatory mortgage lending in the U.S. 

Immigration Colony Ridge
File: A model home in the Colony Ridge development Tuesday, Oct. 3, 2023, in Cleveland, Texas. 

David J. Phillip / AP


Investigators say tens of thousands of potential buyers from the Hispanic community were lured into purchasing land from Colony Ridge with targeted Spanish-language ads on TikTok and other social media platforms. Some of the marketing falsely advertised that the land came with utility connectivity, the civil complaint said, when it did not, and other land that was sold was prone to flooding and raw sewage runoff. 

Once buyers were interested in the land, prosecutors said Colony Ridge directed customers to loan plans they controlled.

“Despite extending loans that total in the tens of thousands of dollars, Colony Ridge fails to assess borrowers’ ability to repay, requiring self-reported (but unverified) gross income, and a nominal down payment,” prosecutors alleged in court documents. The company and its Houston-based lender did not determine whether the borrowers were in the financial position to secure and pay back a loan.

And if owners were unable to keep up with loan payments, the lawsuit alleged the developer foreclosed on the land and sold it to other customers for a profit.

“When borrowers lose their properties to foreclosure, Colony Ridge completes the scam’s life cycle by purchasing the properties back for pennies on the dollar and reselling them at even higher prices to new unsuspecting borrowers,” Assistant Attorney General Kristen Clarke said Wednesday, adding that the Justice Department is pursuing compensation for the victims of the alleged scheme. 

Colony Ridge operated as a “one-stop shop for discriminatory lending,” Clarke alleged. 

Colony Ridge CEO John Harris said in a statement that the company was “blindsided by this lawsuit and we are concerned that the Justice department would pursue this action.”

Calling the lawsuit “baseless,” “outrageous and inflammatory,” Harris said, “Our business thrives off customer referrals because landowners are happy and able to experience the American Dream of owning property.” 

“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,” he added.

Loan Originator Services, which is named in the lawsuit, said in a statement that the Consumer Financial Protection Bureau “appears to be uninformed regarding the applicable law regarding land sales, as well as the facts surrounding Loan Originator Services’ involvement in these land sales.” The company said it “looks forward to explaining why these land sales are legal and appropriate for customers” and expressed confidence the lawsuit would be dismissed once the government “comprehends what actually occurred.”

Prosecutors and federal regulators alleged the predatory lending scheme outlined in court documents violates federal law and said they are warning members of the community of the allegations. 

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