In December 2023, the U.S. Department of Justice prosecuted a Texas real estate developer it accused of defrauding tens of thousands of Hispanic residents into taking out predatory mortgages, a landmark case for the Biden administration.
Colony Ridge, which sold parcels in huge developments north of Houston, had become a “one-stop shop for discriminatory lending,” Kristen Clarke, an assistant attorney general for civil rights, said at a news conference announcing the lawsuit. The developer targeted Hispanic applicants through false advertising and persuaded them to take out high-interest loans that many could not afford, then profited from foreclosing on their properties, according to the lawsuit.
“Our goal ultimately is to ensure that victims are compensated for their loss,” Clarke said.
Three years later, the Trump administration and Colony Ridge are close to resolving the case. But the proposed $68 million settlement provides no money for victims of the alleged scheme. Instead, it sets aside $20 million for law enforcement and immigration enforcement — a provision that could be used to target the very people who were victimized by the developer, according to former government officials who have worked on such cases.
“I’ve never seen a settlement like this, with a complete disconnect between what you’re settling and what the resolution is,” said Elena Babinecz, who led fair lending investigations at the Consumer Financial Protection Bureau for 12 years during the Obama, Trump and Biden administrations, before leaving in October.
“It’s a slap in the face to the people who were wronged; the Justice Department recognizes that they were wronged,” said Babinecz, who was in the office when he joined the Justice Department to file suit against Colony Ridge. “It’s a complete injustice, and it’s not at all why these civil rights laws were passed.”
Seven other attorneys and investigators who once enforced federal civil rights laws in lending and housing also told ProPublica and the Texas Tribune that they were stunned by the deal, which a U.S. district judge has yet to approve. Indeed, Colony Ridge is the Justice Department’s largest case since at least 2018 in which the settlement includes no monetary compensation for victims. The judge scheduled a hearing Friday on the proposal.
A coalition of fair housing and civil rights groups urged the court to reject the settlement, arguing that litigation is the only realistic prospect for many consumers to obtain compensation because they cannot afford private attorneys.
The Justice Department had built a case against Colony Ridge with “glaring and overwhelming evidence,” Clarke told news outlets. Prosecutors said Colony Ridge repeatedly misled consumers about the condition of the lots they purchased, forcing them to spend hundreds or even thousands of dollars to improve drainage and hook up utilities they didn’t know about the land they needed. This contributed to consumers defaulting on high-interest loans, according to the lawsuit. Colony Ridge then benefited from the improvements made to the land it had seized and resold the lots at higher prices.
Ultimately, tens of thousands of victims were exploited through the developer’s predatory practices over eight years, the government claimed. Colony Ridge repossessed more than 15,000 lots, many of which were owned by immigrants, a 2023 Houston Landing Survey find.
Of the Justice Department’s 183 housing and civil enforcement settlements since 2018, only 6% did not include money for victims. Each of these cases was smaller in scope than Colony Ridge. They included a suburban Maryland car dealership accused of racial discrimination in its loan offers over a seven-month period and a California landlord who allegedly refused to provide handicapped parking to a tenant.
None of the settlements – with the exception of Colony Ridge – provide funding for police or immigration enforcement.
As federal investigators built a case on how Colony Ridge treated its largely immigrant customers, conservative media and politicians aligned with Trump — who had made immigration enforcement a cornerstone of his campaign — did not focus on how consumers were harmed. Instead, they accused the development of being a haven for immigrants.
They claimed, without providing evidence, that the complex was a base for Mexican drug cartels and a no-go zone for police. Local law enforcement disputed those claims, saying violent crime there was no different than in other neighborhoods in and around Houston. State legislative committees convened to investigate the allegations also failed after being unable to substantiate the claims.
Neither the federal government nor a lawsuit filed by Texas Attorney General Ken Paxton a few months later raised public safety concerns or the need to beef up policing or immigration.
The Justice Department declined to comment and did not respond to concerns raised by former employees and people involved in the case. Paxton’s office did not respond to several emails. But in announcing the settlement in February, Harmeet K. Dhillon, who heads the department’s Civil Rights Division, argued that Colony Ridge encouraged illegal immigration by targeting Hispanic consumers with the lure of affordable homeownership. “This DOJ will go after all lenders, financiers, and real estate developers who participate in programs that ultimately encourage illegal immigration,” she said. In his own press release on the settlement, which would also resolve the Texas lawsuit, Paxton focused primarily on funding set aside for immigration enforcement. “Under my leadership, Texas will never be a sanctuary for illegal immigrants,” he said.
The focus on immigration makes the lives of those who have been wronged more difficult, said Catherine Bendor, who will lead the Justice Department’s housing and civil enforcement section for eight years until 2024.
“Even if they are citizens, they will likely be harassed by immigration officials who target people based on their appearance or accent,” she said.
John Harris, CEO of Colony Ridge, declined to be interviewed. The settlement does not include an admission of wrongdoing. He has long maintained that his company, which began operations in 2011 and offered mortgages for as little as 1 percent down, did not prey on its customers.
Financing conditions allowed the development to grow quickly, if inconsistently, with neat modular homes, trailers, and abandoned or vacant lots on more than 33,000 acres. Matt Rascon, a spokesman for Colony Ridge, said the company “has found success by providing a path to homeownership through flexible financing options with no credit check.” His comments echo the company’s argument in court that it has opened a path to homeownership for thousands of low-income consumers that risk-averse banks are rejecting.
Offering loans when others would not is the most common argument predatory lenders use to justify their practices, said Nathalie Martin, a law professor at the University of New Mexico who has studied high-cost loans.
“This situation shows that it’s not helping people get more expensive loans than they need to,” Martin said.
Former federal officials and Colony Ridge landowners acknowledge that the settlement includes some provisions aimed at protecting consumers in the future. It would require Colony Ridge to adopt stricter lending standards and allow buyers to walk away from their purchases without penalty within two months. The developer would also spend $48 million on infrastructure upgrades and ensure transparent, bilingual marketing and communications.
Another provision prohibits Colony Ridge from developing new lots for sale for three years. But the agreement exempts 674 acres that the developer has already subdivided.
The concessions are helpful but insufficient because they miss a clear opportunity to help victims recoup money they lost, which is a key reason such complaints are filed, said Jon Seward, who was a principal deputy chief of the Justice Department when he left the department in May 2023 after 17 years in the housing and civil enforcement section.
One of those victims was Maria Acevedo, a self-described lifelong Republican and U.S. citizen who said she voted for Trump three times.
A former real estate developer herself, Acevedo took out a high-interest $40,000 loan in 2018 to purchase a half-acre of land where she planned to retire. It then spent another $60,000 on studies, engineering and adding dirt to protect against flooding.
Acevedo said she planned to refinance her loan but learned she couldn’t do so because the property had a lien from a previous owner e. Colony Ridge foreclosed on the property three years later, although Acevedo said it was making payments. Colony Ridge has not commented on Acevedo’s case or that of others involved in this story. The foreclosure ruined his retirement plans, Acevedo said, adding that the challenges strained his marriage and ultimately led to a divorce.
She considered finding a lawyer to sue. But she said she decided to “become part of a team” and serve as a government witness after federal investigators pledged to help victims like her regain what they had lost.
Today, Acevedo said, she feels betrayed by a regulation that ignores Hispanic consumers like her.
“I know we were targeted. A blind person could see it,” Acevedo said.
She added that the trial was “going smoothly, but once the Trump administration came in and took over, things changed.”
Even if she was now able to find a lawyer, her deadline to file a lawsuit expired because state and federal laws require them to be filed within five years.
Since returning to power, the Trump administration has dropped an $80 million settlement with Navy Federal Credit Union over illegal overdraft fees, which allowed the bank to continue operating without penalty and ended dozens of investigations, including one case accusing a major Pennsylvania lender of defrauding student borrowers. Both defendants have denied any wrongdoing.
The Trump administration and White House Budget Director Russell Vought have targeted the CFPB, which was created to protect consumers from corporate scams. For Vought, the agency it was an example government overreach. It was also one of first targets for Trump’s Department of Government Effectiveness. In April, in response to a lawsuit filed by bureau employees against the CFPB’s attempt to lay off 90 percent of its staff, the administration offered a compromise proposal: eliminate two-thirds.
The White House and Vought’s office declined to comment, but the administration maintained that the agency unnecessarily aggressive and unnecessary.
Dropping consumer protection lawsuits gives the impression that the federal government is no longer serious about protecting ordinary citizens from unscrupulous companies, former employees of the Department of Justice and the CFPB. said.
Investigators spent months collecting stories and building trust with residents who were reluctant to cooperate, said Johnathan Smith, a former assistant attorney general for civil rights under the Biden administration who toured the development before the trial. The team worked to ensure that the community “believed that something was going to be different because the Department of Justice got involved.”
“It’s just heartbreaking to see how the regulations have failed to achieve this goal,” he said.
SuEllen Sanchez and her sister, Keilah Sanchez, were among those who shared their story with investigators, hoping the government would help them recover what they had lost. They also provided investigators with hundreds of records from neighbors claiming to have been scammed.
An American citizen born in Puerto Rico, SuEllen Sanchez bought five lots in Colony Ridge in 2020. She saw it as a way to invest the money she had earned as a beautician and perhaps open a business there.
Sanchez said Colony Ridge advertisements and sales representatives led her to believe the lots would be ready for construction. This was not the case. Clearing the land for development, acquiring permits and hooking up utilities cost him more than $10,000. Colony Ridge foreclosed on one of the lots in 2021, according to Sanchez, who disputes the developer’s claims that she missed her loan payments.
Sanchez wondered if others also thought they were scammed. That’s when she and her sister, a web developer who had also purchased properties in Colony Ridge, launched a website asking residents to share their experiences with the developer.
Sanchez said she was dismayed that all their efforts resulted in the proposed settlement.
“These were consumer lawsuits, so you would think they would actually do something for consumers with everything they were stipulating that this company did wrong,” Sanchez said. “There is no way that someone who has committed all of these violations can continue to operate.”
Acevedo feels the same way and she wants the judge to know that as he considers the settlement. She doesn’t have an attorney, but after the Justice Department offered one, she filed a legal brief in the case demanding compensation as a victim. She offered to testify and present evidence.
“I want the court to hear from me directly,” she wrote to Judge Alfred H. Bennett. “I’m willing to swear on my experience.”
On Friday, she plans to travel 30 miles to Courtroom 9A at the federal building in Houston for the settlement hearing, hoping the judge grants her request to be heard.
