HOUSTON (CN) — The Justice Department sued a Houston-area developer on Wednesday, claiming the company is inducing Hispanic immigrants to take out high interest rate loans they cannot afford with advertisements offering them the American dream of homeownership.
Colony Ridge, a development in Liberty County, located northeast of Houston, is home to an estimated 40,000 to 50,000 people in rural subdivisions spread across 33,000 acres.
The owners of the developer Colony Ridge Development LLC, brothers John and William “Trey” Harris, portray it as providing Houston’s large population of working-class Latino immigrants an otherwise unattainable means of upward mobility. It sells lots and provides loans to buy them with no minimum requirements, other than down payments as low as $500.
But many borrowers cannot keep up with the payments due to interest rates ranging from 10.9% to 12.9%, the Justice Department and Consumer Financial Protection Bureau say in their lawsuit, filed in Houston federal court.
“Roughly one-in-four Colony Ridge loans ends in foreclosure, after which the company repurchases the properties and sells them to new borrowers,” the Justice Department said in a statement announcing the litigation.
The feds say the company drums up business with ads on social media with aspirational messages — “Achieve the American dream here!” and “Fulfill the Dream of Being an Owner” — that are almost exclusively in Spanish, and often feature Latino music and the national flags of Mexico, Columbia, Honduras and Venezuela.
Despite the fact its target clients are primarily Spanish speakers, Colony Ridge gives them closing documents that are in English only, the feds claim.
Many buyers place trailers or mobile homes on their lots with the goal of saving money to have homes built, and, according to the government, some have been blindsided by unexpected expenses because Colony Ridge has falsely represented its lots are sold with water, sewer and electricity hookups in place.
Colony Ridge is also not upfront about the risk of flooding in their subdivisions, the lawsuit says.
“For example, parts of the Terrenos Houston Subdivisions have experienced significant flooding when it rains, which can cause various problems for consumers, such as impeding their ability to build a dwelling, causing raw sewage to run through or around their land, and damaging their personal property,” the complaint states.
The lawsuit accuses Colony Ridge of violating several federal laws: the Fair Housing Act, the Equal Credit Opportunity Act, the Consumer Financial Protection Act of 2010 and Interstate Land Sales Full Disclosure Act.
It seeks an injunction ordering Colony Ridge and three affiliate companies to stop racial and national origin discrimination in their lending practices, take steps to restore clients who had their lots foreclosed on to their financial positions prior to taking out Colony Ridge loans and to stop misrepresenting the conditions of their lots.
Attorney General Merrick Garland said the Justice Department is cracking down on home lending discrimination through its “Combating Redlining Initiative” that it launched two years ago. “Discrimination in lending harms families and neighborhoods for generations; it is wrong and has no place in our country,” he said in a statement.
The lawsuit caps what has been a tumultuous year for Colony Ridge’s owners, the Harris brothers.
In response to false reports from conservative media outlets that Colony Ridge is a haven for cartel members, Texas Governor Greg Abbott named the development a top agenda item for a third special state Legislature session he convened in early October.
Despite hearing testimony from local law enforcement and officials debunking the cartel stronghold conspiracy, Republican lawmakers included, in a bill Abbott signed Monday, a $40 million appropriation to the Texas Department of Public Safety to pay for state trooper patrols of the development.
John Harris, the company's CEO, called the lawsuit "baseless," "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," he wrote in an emailed statement.
Follow @cam_langford
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
