Lawsuit Alleges Developer Deceived Thousands into Risky Loans for Homes Lacking Essential Infrastructure
The U.S. Justice Department has launched its first legal case regarding predatory mortgage lending against a Texas developer accused of manipulating Hispanic homebuyers through deceptive sales tactics on platforms such as TikTok. The lawsuit targets Colony Ridge, a vast housing development northeast of Houston, where Spanish-language advertisements promise affordable homeownership. However, the government alleges that the developer misleads applicants into purchasing homes with no essential utilities by offering high-risk loans that many buyers are unable to repay.
The developer reportedly uses aggressive sales tactics, preying on individuals with limited English skills, and the results have been devastating. Many of the homebuyers discovered that their properties lacked basic amenities, and were prone to flooding and sewage issues. Assistant Attorney General Kristen Clarke, overseeing the Civil Rights Division, stated that this fraudulent and discriminatory scheme has caused significant harm to families who were misled into financially risky commitments.
In response, Colony Ridge CEO John Harris dismissed the lawsuit as unfounded, claiming that the business thrives on customer referrals from satisfied landowners. He defended his company’s practice of offering loans to individuals who struggle to obtain credit from other sources, although he acknowledged that interest rates on these loans are higher than usual.
The sprawling Colony Ridge development, which is home to over 40,000 residents, has expanded rapidly, partly due to aggressive TikTok advertising and offering loans that bypass credit checks. However, these loans often carry high interest rates and lack proper affordability assessments. Between 2019 and 2022, at least 30% of the properties sold through seller-financed loans faced foreclosure within three years, according to the lawsuit.
Moreover, the company has been accused of profiting from foreclosures. When a buyer fails to make payments and loses their property, Colony Ridge buys it back and resells it at a higher price, according to Consumer Financial Protection Bureau Director Rohit Chopra.
The development also gained national attention this fall when conservative groups and media pushed unfounded claims that it was a haven for undocumented immigrants and that criminal cartels were active within the neighbourhood. These allegations were refuted by local residents, officials, and the developer, with no evidence to support such claims.
This latest legal action, filed by the Justice Department, seeks civil penalties and compensation for those affected by the fraudulent practices. The case also forms part of the department’s broader efforts to combat redlining, a practice in which lenders discriminate based on race, colour, or national origin. One woman, who sold her mother’s home to buy into Colony Ridge, found herself burdened with thousands of dollars in additional costs for basic infrastructure. She also experienced severe flooding that made it impossible for her to enter or exit the area during heavy rains.
U.S. Attorney Alamdar Hamdani for the Southern District of Texas condemned the developer’s actions, stating that they exploited the immigrant dream of homeownership, often leading to financial ruin and dashed hopes for many families.
