Tag Archive for: Consumer Financial Protection Bureau

DOJ, CFPB Sue Colony Ridge for Bait-and-Switch, Predatory Lending, More

12/20/23 – Legal woes are mounting for Colony Ridge. Today, the U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) filed suit against the controversial Liberty County developer and the companies they own or control.

The government filed a complaint against land development companies Colony Ridge Development, LLC and Colony Ridge BV, LLC, affiliate mortgage company Colony Ridge Land, LLC (collectively, the Colony Ridge defendants), and loan origination company Loan Originator Services, LLC.

The Bureau and DOJ allege that defendants violated the Equal Credit Opportunity Act (ECOA) by targeting consumers of Hispanic origin with a predatory loan product.

CFPB Press Release
Merry Christmas from Colony Ridge
Colony Ridge homeowner just before Christmas 2020

Additional Allegations in Lawsuit

The CFPB separately alleges that:

  • The Colony Ridge defendants violated the Consumer Financial Protection Act of 2010 (CFPA) by making deceptive representations to consumers.
  • Colony Ridge Development and Colony Ridge BV violated the Interstate Land Sales Full Disclosure Act (ILSA) by making untrue statements, omitting material facts, failing to provide required accurate translations, and failing to report and disclose required information.
  • Defendants violated the CFPA by virtue of their violations of ECOA and ILSA, respectively.
  • Defendants’ conduct violated the Fair Housing Act.

Goal of Lawsuit

The joint complaint seeks, among other things, injunctions against defendants to prevent future violations of Federal consumer financial laws, redress to consumers, damages, and the imposition of civil money penalties.

DOJ and CFPB contend that the defendants operated an illegal land sales scheme and targeted tens of thousands of Hispanic borrowers with false statements and predatory loans.

Revolving Door Foreclosures that Targeted Hispanics

The joint DOJ/CFPB press release said that Colony Ridge “sells unsuspecting families flood-prone land without water, sewer, or electrical infrastructure, and that the company sets borrowers up to fail with loans they cannot afford. Roughly 1-in-4 Colony Ridge loans ends in foreclosure, after which the company repurchases the properties and sells them to new borrowers.” It amounted, say the plaintiffs to a “set-up-to-fail scheme that has led thousands of families to lose their dreams of homeownership.”

Another Colony Ridge homeowner on January 1, 2021.

Bait-and-Switch Allegations

CFPB Director Rohit Chopra said, “Our investigation uncovered that Colony Ridge is baiting borrowers with lies, saddling families with predatory loans for homesites that the company knows have repeatedly flooded with raw sewage and lacked basic utility infrastructure.”

Merrick B. Garland, U.S. Attorney General said, ““Today’s complaint alleges that Colony Ridge targeted Hispanic consumers with predatory loans, misled borrowers about the water, sewer, and electrical infrastructure on its lots, and exploited language barriers by conducting most of its marketing in Spanish while offering important transaction documents only in English.” 

Foreclosure and property deed records from September 2019 through September 2022 show that Colony Ridge initiated foreclosures on at least 30% of seller-financed lots within just three years of the purchase date, with most loan failures occurring even sooner. 

“Records also confirm that Colony Ridge accounted for more than 92% of all foreclosures recorded in Liberty County between 2017 and 2022.”

CFPB/DOJ Joint Press Release

The Entire Laundry List

The complaint cites a number of specific practices. It alleges that Colony Ridge:

  • Misleads borrowers about infrastructure on the lots it sells: Colony Ridge has falsely represented that lots in the Terrenos Houston subdivisions were sold with water, sewer, and electrical infrastructure already in place. ” It is only after applicants pay a non-refundable deposit that Colony Ridge discloses the properties may not provide those services and makes that disclosure only in English.”
  • Sells lots that flood with rain and raw sewage. The complaint alleges that Colony Ridge employees fail to inform borrowers of flood risk when lots have repeatedly flooded in the past, or falsely tells them the lots have not flooded. In fact, in parts of the subdivision, rain causes significant flooding, causing raw sewage to run through or around borrowers’ property, and damaging their personal belongings
  • Churns through borrowers in a cycle of foreclosure: When families fall behind on payments and enter foreclosure, it allows Colony Ridge to “flip” the properties by repurchasing and reselling them, often at higher prices. Foreclosure and property deed records show that Colony Ridge flipped at least 40% of all the properties it sold between September 2019 and September 2022, selling approximately 8,237 properties twice, 3,267 properties three times, and 2,067 properties four or more times in three years.
  • Targets Hispanic consumers with predatory loans: Through direct-to-consumer marketing on websites, social media engagement, and telemarketing, Colony Ridge targets Hispanic consumers. Colony Ridge then exploits language barriers during its sales process and uses high-pressure sales tactics to push borrowers to obtain their loan products quickly. The loans have exorbitant interest rates. Between 2017 and 2021, interest rates on Colony Ridge’s loans ranged from between 10.9% to 12.9%, while a standard 20-year fixed rate loan averaged 2.35% to 4.05% during the same timeframe. And in extending the loan, Colony Ridge and Loan Originator Services did not collect information needed to determine if applicants can afford the loan.
  • Exploits language barriers at borrowers’ expense: While Colony Ridge conducts most of its marketing activities in Spanish, when it comes to the actual transaction, it offers important documents only in English. Failing to offer borrowers accurate translations of contracts, deeds, and other documents in the language in which it conducts the sales and exploiting borrowers’ limited English proficiency violates federal law.

To see all 45 pages of the lawsuit, click here.

Could More Lawsuits Follow?

Today’s lawsuit follows courageous investigations by a number of news outlets and Texas Attorney General Ken Paxton. They include:

Precinct 3 Commissioner Tom Ramsey brought many of the drainage issues in front of Harris County Commissioners Court last October. No action has yet been taken at the county level.

Posted by Bob Rehak on 12/20/23

2304 Days since Hurricane Harvey

The thoughts expressed in this post represent opinions on matters of public concern and safety. They are protected by the First Amendment of the US Constitution and the Anti-SLAPP Statute of the Great State of Texas.