Assistant Attorney General Kristen Clarke Delivers Remarks Announcing Lawsuit Against Texas-Based Developer and Lender Colony Ridge

Remarks as Prepared for Delivery

Good morning. I am joined today by Director Rohit Chopra of the Consumer Financial Protection Bureau and U.S. Attorney Alamdar Hamdani for the Southern District of Texas.

Today, the Justice Department and the Consumer Financial Protection Bureau filed a lawsuit against Texas-based developer and lender Colony Ridge Development LLC, and its affiliates for operating an illegal land sales scheme and targeting tens of thousands of Hispanic borrowers with false statements and predatory loans.

The complaint alleges that Colony Ridge’s actions violate the Fair Housing Act and Equal Credit Opportunity Act, two federal civil rights laws that prohibit discrimination in housing and lending. This is the first predatory mortgage lending case brought by the Justice Department. The complaint also alleges violations of consumer protection laws which Director Chopra will provide more information about shortly.

The Colony Ridge development, also known as Terrenos Houston or Terrenos Santa Fe, is northeast of Houston and currently home to more than 40,000 people. The development has a massive geographic footprint, currently spanning across more than 33,000 acres, nearly the same size as Washington, D.C. And it is growing.

Our investigation revealed that Colony Ridge operates as a one-stop shop for discriminatory lending. First, it targets Hispanic applicants with false advertising, promising homeownership on properties it claims have basic utilities such as water and electricity. Second, it steers applicants into seller-financed loans, exploiting their limited English proficiency in the process so that it can close the deal. And, unlike responsible lenders who conduct a careful determination about whether an applicant can repay a loan, Colony Ridge does not verify income or any ability to pay, knowing that it stands to benefit if the borrower defaults on the loan.

After locking families into loans they cannot afford, Colony Ridge then provides them with flood-prone properties. Many borrowers are then forced to sink additional money into making the lots habitable while Colony Ridge stands by waiting for homeowners to default on loans. 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.

The impact of this unlawful, discriminatory and fraudulent scheme is devastating. Nearly one out of every three Colony Ridge loans fails within three years. That is more than 10 times the national rate and, based on Colony Ridge’s sheer size and how long it’s been in operation, that equates to thousands of Hispanic borrowers who lost their homes because of this scam. We heard from one woman who used the proceeds from selling her mother’s home to purchase a Colony Ridge property, only to discover that she would need to spend thousands of dollars to set up infrastructure for basic utilities, despite being told that those services were “ready” on the property. Colony Ridge also told her that the property would never flood. But in reality, during heavy rains, flooding is so bad that she cannot get into or out of her neighborhood. It pained her to realize that with all the money she’s invested into her Colony Ridge property, she could have afforded a move-in ready home.

This lawsuit is a part of the Justice Department’s Combating Redlining Initiative and underscores why equal access to credit on fair terms is so important. Indeed, redlining is one of the major reasons that homeownership scams still have a foothold in our economy today. It leaves vulnerable communities devoid of real credit options, and a perfect target for reverse redlining scams that zero in on these communities with predatory loan products. Through today’s action, the Justice Department is making clear that it is equally determined to stamp out predatory lenders who take advantage of the conditions created by redlining as it is to prevent illegal redlining in the first place.

I also want to take a moment and speak to the residents of Colony Ridge. I know that you are hardworking people who are hoping to achieve the American dream of homeownership. Through this lawsuit, we are seeking to compensate those who have suffered losses due to these predatory practices. And for future homeowners who intend to live in this development, our lawsuit seeks to ensure that Colony Ridge delivers on its promises, and that it offers a fair process for obtaining loans, transparent terms and a proper assessment of whether you can afford to pay back the loan.

In closing, I want to thank our colleagues in the Civil Rights Division, the Consumer Financial Protection Bureau and the U.S. Attorney’s Office for their work and efforts. Attorneys and staff have spent countless hours with Colony Ridge residents to gather their first-hand accounts of their experiences. We are committed to working with the community to bring this unlawful scheme to an end.

I’ll now turn the floor over to Director Chopra to provide more context and information about our historic joint filing.

Thank you.