Texas-based housing developer accused of targeting Hispanic borrowers in predatory lending scheme, lawsuit says

Washington — A Texas-based housing developer and mortgage lender is accused of focusing on members of the Houston space’s Hispanic neighborhood by providing loans to individuals who couldn’t pay them again, promoting them land in disrepair and benefiting from language obstacles.

Prosecutors allege Colony Ridge Improvement, LLC, and its subsidiaries carried out a predatory lending scheme by which foreclosures have been a part of the enterprise mannequin, based on a federal lawsuit filed Wednesday. 

The builders — who dealt with over 40,000 tons throughout 33,000 acres — have been sued by the Justice Division Wednesday in what was the primary effort by civil rights prosecutors to confront predatory mortgage lending within the U.S. 

Investigators say tens of hundreds of potential patrons from the Hispanic neighborhood have been lured into buying land from Colony Ridge with focused Spanish-language advertisements on TikTok and different social media platforms. A number of the advertising falsely marketed that the land got here with utility connectivity, the civil grievance mentioned, when it didn’t, and different land that was bought was liable to flooding and uncooked sewage runoff. 

As soon as patrons have been within the land, prosecutors mentioned Colony Ridge directed prospects to mortgage plans they managed.

“Regardless of extending loans that complete within the tens of hundreds of {dollars}, Colony Ridge fails to evaluate debtors’ potential to repay, requiring self-reported (however unverified) gross revenue, and a nominal down cost,” prosecutors alleged in court docket paperwork. The corporate and its Houston-based lender didn’t decide whether or not the debtors have been within the monetary place to safe and pay again a mortgage.

And if house owners have been unable to maintain up with mortgage funds, the lawsuit alleged the developer foreclosed on the land and bought it to different prospects for a revenue.

“When debtors lose their properties to foreclosures, Colony Ridge completes the rip-off’s life cycle by buying the properties again for pennies on the greenback and reselling them at even increased costs to new unsuspecting debtors,” Assistant Legal professional Common Kristen Clarke mentioned Wednesday, including that the Justice Division is pursuing compensation for the victims of the alleged scheme. 

Colony Ridge operated as a “one-stop store for discriminatory lending,” Clarke alleged. 

Colony Ridge CEO John Harris mentioned in a press release that the corporate was “blindsided by this lawsuit and we’re involved that the Justice division would pursue this motion.”

Calling the lawsuit “baseless,” “outrageous and inflammatory,” Harris mentioned, “Our enterprise thrives off buyer referrals as a result of landowners are completely satisfied and capable of expertise the American Dream of proudly owning property.” 

“We mortgage to those that haven’t any alternative to get a mortgage from anybody else and we’re pleased with the connection we’ve developed with prospects,” he added.

Mortgage Originator Companies, which is called within the lawsuit, mentioned in a press release that the Client Monetary Safety Bureau “seems to be uninformed relating to the relevant legislation relating to land gross sales, in addition to the information surrounding Mortgage Originator Companies’ involvement in these land gross sales.” The corporate mentioned it “appears ahead to explaining why these land gross sales are authorized and applicable for patrons” and expressed confidence the lawsuit could be dismissed as soon as the federal government “comprehends what truly occurred.”

Prosecutors and federal regulators alleged the predatory lending scheme outlined in court docket paperwork violates federal legislation and mentioned they’re warning members of the neighborhood of the allegations. 

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