The Justice Department has filed its first predatory mortgage lending case against a Texas developer, Colony Ridge Development, LLC, accusing them of targeting Hispanic homebuyers and using platforms like TikTok to lure them into "bait and switch" sales. The lawsuit specifically focuses on a massive development northeast of Houston, also called Colony Ridge, that promised homeownership to potential buyers through advertisements in Spanish. However, the Justice Department alleges that the developer steered applicants into buying properties without basic utilities and took out loans that they couldn't afford to repay.

Assistant Attorney General Kristen Clarke, who oversees the department's civil rights division, stated that the impact of this scheme is devastating, as many buyers discovered that the lots they purchased lacked basic utilities and were prone to flooding with rain and raw sewage. The developer allegedly used high-pressure sales tactics that exploit limited English proficiency. The Justice Department's lawsuit seeks unspecified civil penalties and compensation for customers.

Colony Ridge CEO John Harris responded to the lawsuit, calling it "baseless and both outrageous and inflammatory." He claimed that the company's business thrives off customer referrals and that they loan to those who have no other opportunities to obtain a loan. He also denied responsibility for flooding problems in the area.

The development, which is home to over 40,000 people and covers a geographic footprint nearly the size of Washington, D.C., has been growing quickly, partly due to advertising on TikTok and offering loans that require no credit check and only a small deposit. However, these loans have high interest rates, and the company allegedly did not verify whether customers could afford them.

According to the Justice Department, between 2019 and 2022, Colony Ridge initiated foreclosures on at least 30% of its seller-financed lots within three years. Rohit Chopra, director of the Consumer Financial Protection Bureau, stated that foreclosure is actually a part of Colony Ridge's business model. When a family falls behind on payments and loses their property, Colony Ridge buys it back and sells it to another buyer, often at a higher price.

Aside from the predatory lending allegations, the neighborhood attracted national attention as conservative media and GOP activists spread unsubstantiated claims that it was a magnet for immigrants living in the U.S. illegally and that cartels controlled parts of the neighborhood. However, there was no evidence to support these claims, and residents, local officials, and the developer disputed them.

The Justice Department's lawsuit against Colony Ridge is also part of its efforts to fight redlining, an illegal practice where lenders avoid providing credit to people based on their race, color, or national origin. U.S. Attorney Alamdar Hamdani for the Southern District of Texas stated that Colony Ridge exploited an immigrant's dream of owning a home. Their practices often resulted in families facing economic ruin, no home, and shattered dreams.

The allegations against Colony Ridge Development, LLC highlight the issue of predatory lending in the housing market and the vulnerability of communities with limited English proficiency. The Justice Department's lawsuit seeks to hold the developer accountable for their alleged discriminatory and fraudulent scheme, while also seeking compensation for the victims.