DOJ alleges Houston developer swindled Hispanic borrowers with ‘bait and switch’ scheme

(HOUSTON) — The Justice Department on Wednesday announced its first-ever predatory mortgage lending lawsuit against a Houston-based developer they accuse of swindling tens of thousands of Hispanic borrowers into buying flood-prone homes with loans that were designed to fail.

Officials say Colony Ridge used targeted ads on TikTok to appeal to Spanish-speaking borrowers, promising them the “dream of homeownership” with easy-to-obtain loans that required no credit checks and a small deposit.

But the Justice Department alleges it was all part of a bait-and-switch — thousands of mostly-Hispanic borrowers lured into homes with shoddy water, sewer and electrical infrastructure on payment plans that they’d never be able to afford. Interest rates were astronomical, ranging between 10.9-12.9% in some instances.

The lawsuit says Colony Ridge exploited language barriers as well by conducting most of its marketing in Spanish, yet offered important transaction documents only in English.

“Discrimination in lending harms families and neighborhoods for generations, it is wrong, and it has no place in our country,” Attorney General Merrick Garland said in a Justice Department news release.

In instances where families would fall behind on payments, they were quickly bought out by Colony Ridge and their houses were then flipped and resold for higher prices to more unsuspecting buyers, the lawsuit alleges.

The DOJ’s investigation found that as a result, Colony Ridge would initiate foreclosures on roughly 30% of their lots within just three years of the purchase date, accounting for more than 92% of all foreclosures in Liberty County, Texas, between 2017 and 2022.

The lawsuit, brought in tandem with the Consumer Financial Protection Bureau, is seeking an injunction against Colony Ridge from further engaging in their alleged predatory practices as well as yet-to-be determined financial relief for their victims. The DOJ is asking anyone who believes they were victims to contact the department’s housing discrimination hotline at 1-833-591-0291.

“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,” said Assistant Attorney General Kristen Clarke. “This lawsuit demonstrates our commitment to holding accountable those in the housing and financial industry who intentionally target and exploit homebuyers because they are Hispanic or don’t speak English well.”

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