(The Center Square) – A new lawsuit filed against a developer in Texas is baseless, outrageous and inflammatory, the company argues.
The U.S. Justice Department and Consumer Financial Protection Bureau sued property 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,” alleging it violated the Fair Housing Act and Equal Credit Opportunity Act.
The lawsuit is civil, not criminal, and doesn’t address illegal immigration, a claim critics have made, that the development is an “illegal alien colony.” Instead, Assistant Attorney General Kristen Clarke said, “Colony Ridge operates as a one-stop shop for discriminatory lending” by targeting “Hispanic applicants with false advertising, promising homeownership on properties it claims have basic utilities such as water and electricity.” She also said, “it steers applicants into seller-financed loans, exploiting their limited English proficiency in the process so that it can close the deal.”
The Justice Department claims the company “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.”
Another claim in the 45-page lawsuit is it “exploits language barriers by conducting most of its marketing in Spanish while offering important transaction documents only in English.”
John Harris, CEO of Colony Ridge, said, “The lawsuit is 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. 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.”
At a Texas House State Affairs Committee hearing earlier this year, Harris told lawmakers why the company was founded: “to buy land that no one else wanted and sell to people no one else would sell to. The most important thing we did for our customers is to provide financing that they couldn’t get anywhere else. That allowed them to move on to the property.”
The company built an activity center where the property owner association helps customers with their permits. This includes providing assistance for water and sewer connection, culvert permit and inspection, building and meter-pole permitting, light service connection and a mailbox service. Translation services are provided to help property owners, he said; “we help them every step of the way as much as we can.”
At the hearing, lawmakers discussed how Liberty County approved all property development permitting in compliance with state law.
Clarke said the lawsuit is “the first predatory mortgage lending case brought by the Justice Department.” The complaint also states, “Since at least 2016, Loan Originator Services, LLC, has originated all of Colony Ridge’s seller-financed mortgages.”
Colony Ridge is not a mortgage lender. It is a property developer that offers self-financing loans for customers to purchase land. In a power point presentation given to state lawmakers earlier this year, obtained by The Center Square, it states, “Colony Ridge sells dirt, not finished homes, not double-wides, not cement slabs, not driveways, not sidewalks, culverts, lawns or patios.” It provides self-financing, screens all applicants through the Office of Foreign Assets Control database, and its lending practices “follow the guidelines of the Texas Department of Savings and Mortgage Lending, and are in fact approved by them.”
The lawsuit also alleges Colony Ridge LLC and its affiliates primarily advertise in Spanish, target the Hispanic community, and do not run credit checks.
Nearly all companies in the Houston area advertise in Spanish. Houston-based Matador Lending explains owner financing is “the same as if you purchased from a for sale by owner or from your relative. No credit or income check, no employment verification. All you need is 20% down. If you have 20% down, we believe you deserve your home of choice no matter what your credit score is,” The Center Square previously reported.
The Houston Association of Realtors provides information about the lending practice on its website, as do multiple companies, including Bankrate, Zillow and Houston Owner Financing. They point out that no credit check is needed to apply.
Harris told The Center Square earlier this year, “we love our customers” and the success of the development is because of customer referrals. The Harris brothers grew up in poverty and wanted to provide an opportunity for underserved people to own land, he said.
