The Consumer Financial Protection Bureau (CFPB) and the Justice Department have filed a lawsuit against Colony Ridge, a Texas-based developer and lender, accusing it of operating an illicit land sales scheme that has targeted tens of thousands of Hispanic consumers.
Colony Ridge, along with three affiliated companies and Loan Originator Services, a nonbank mortgage company licensed in Texas, have been named as defendants in the lawsuit. The company has developed more than 40,000 lots in an unincorporated area of Liberty County, Texas, approximately 30 miles northeast of Houston. These subdivisions are marketed under the names “Terrenos Houston” and “Terrenos Santa Fe.”
The lawsuit alleges that Colony Ridge has enticed tens of thousands of Hispanic borrowers into their exploitative loan products. Records from September 2019 to September 2022 show that Colony Ridge initiated foreclosures on at least 30% of seller-financed lots within just three years of the purchase date. Furthermore, between 2017 and 2022, Colony Ridge accounted for more than 92% of all foreclosures recorded in Liberty County.
According to the complaint filed on December 20, 2023, the company misled borrowers about the infrastructure on the lots it sells. Colony Ridge allegedly falsely claimed that lots in the Terrenos Houston subdivisions were sold with water, sewer, and electrical infrastructure already in place. These misrepresentations were made through various advertisements, including TikTok videos where the company claimed, “Terrenos Houston tiene todos los servicios de ciudad por cada terreno” (“Terrenos Houston has all city services for each lot.”). However, after applicants paid a non-refundable deposit, Colony Ridge disclosed that the properties might not provide those services, and this disclosure was only made in English.
Moreover, the complaint accuses Colony Ridge of selling lots that repeatedly flood with rain and raw sewage. It alleges that the company’s employees either failed to inform borrowers of this flood risk or falsely assured them that the lots had not flooded previously.
The lawsuit also claims that Colony Ridge engages in a cycle of foreclosure, allowing it to “flip” properties by repurchasing and reselling them, often at higher prices. Records show that between September 2019 and September 2022, Colony Ridge flipped at least 40% of all the properties it sold, selling approximately 8,237 properties twice, 3,267 properties three times, and 2,067 properties four or more times in three years.
Colony Ridge is also accused of targeting Hispanic consumers with predatory loans through aggressive marketing on websites, social media, and telemarketing, exploiting language barriers during its sales process. The company is said to have offered loans with interest rates ranging from 10.9% to 12.9% between 2017 and 2021, a period when a standard 20-year fixed-rate loan averaged 2.35% to 4.05%. Furthermore, Colony Ridge and Loan Originator Services allegedly did not collect necessary information to determine if applicants could afford the loan.
Finally, the lawsuit alleges that while Colony Ridge conducts most of its marketing activities in Spanish, it provides important documents only in English during transactions. This practice exploits borrowers with limited English proficiency by failing to offer accurate translations of contracts, deeds, and other documents in the language used for sales.
The CFPB and Justice Department’s lawsuit represents a significant step in holding Colony Ridge accountable for its alleged predatory practices. The outcome of this case will undoubtedly have far-reaching implications for consumer protection within the land development industry.
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