Federal officials allege in the lawsuit that developers exploited Spanish speakers’ language barriers by providing them key documents and information in English and steering them to seller-financed loans that families could not afford. Borrowers often had to spend more money to make their homes habitable because they were on flood-prone properties, forcing many borrowers into foreclosure, the Justice Department said.
Buyers were charged exorbitant interest rates, averaging 10.9% to 12.9% from 2017 to 2021, when the standard fixed-rate loan was 2.35% to 4.05%, the Justice Department alleged.
Trey Harris, the brother of John and also a Colony Ridge developer, has told The Associated Press that Colony Ridge charges higher interest rates on its loans because banks will not provide the loans.
From American dream to ‘nightmare’
The Justice Department further alleged that properties that went into foreclosure were bought back for pennies on the dollar and resold at higher prices.
Assistant Attorney General Kristen Clarke said in a statement that nearly 1 in every 3 Colony Ridge loans failed within three years, 10 times the national rate, which she said means thousands of Hispanic buyers have 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,” Clarke said.
Clarke said that the woman also was told the property would never flood but that during heavy rains, the flooding was so bad she could not get out of her neighborhood.
Colony Ridge, marketed as Terrenos Houston and Terrenos Santa Fe, spreads over a vast unincorporated area of Liberty County about 30 miles northeast of Houston. The development, with about 40,000 lots, is nearly the size of Washington, D.C., officials said.
“Colony Ridge promised the American dream, but we allege that in reality, it has delivered a nightmare for thousands of hardworking Hispanic families who hoped to build their homes in the Terrenos Houston community,” Clarke said.
Justice Department officials alleged Hispanics were targeted initially through TikTok and other social media services, using national flags and regional music from Latin America. The ads promised no credit checks and small deposits. Deposits were nonrefundable.
Officials said the lawsuit is part of the Justice Department’s Combating Redlining Initiative. Redlining is a practice of withholding financial and other services from people because they live in certain neighborhoods, usually ones that are predominantly Latino, Black and low-income.
“Discrimination in lending harms families and neighborhoods for generations and it is wrong and it has no place in our country,” Attorney General Merrick Garland said in a statement.
The development was one of three topics Gov. Greg Abbott directed the Texas Legislature to address when he called legislators into a rare third special session this year. Right-wing media reported that the development was a haven for people illegally in the U.S., a no-go zone for law enforcement and a hub for cartel activity. Law enforcement agencies that police the area pushed back against that narrative, and the rhetoric was not substantiated.
Legislators did not focus on the developers’ lending or development practices.
Clarke sought to reassure people who had bought homes in Colony Ridge.
“I know you are hardworking people who are hoping to achieve the American dream of home ownership,” she said. “Through this lawsuit we are seeking to compensate those who have suffered losses due to these predatory practices.”
The Justice Department and the Consumer Financial Protection Bureau asked people with complaints about their experience with the developer and its affiliates to call a Justice Department housing discrimination hotline at 833-591-0291, go through the prompts for the Colony Ridge lawsuit and leave messages. Or they can email ColonyRidge.Lawsuit@usdoj.gov.