The Consumer Financial Protection Bureau yesterday announced it had filed suit against a developer and lender for operating an illegal land sale scheme and targeting Hispanic borrowers with loans they couldn’t afford, many of which ended up in foreclosure and allowed the company to repeat the process.
The Background: Using tailored advertising n Spanish on TikTok, the company promised individuals the dream of homeownership. What those individuals ended up with, though, was a plot of land in a flood-prone area that did not have water, sewer, or electrical access. The individuals were forced to sign documents that were provided only in English and received loans with interest rates that were as much as five times the average mortgage interest rate.
- As many as one-third of individuals who obtained loans defaulted on them, leading the developer to foreclose on the property and then re-sell it to someone else. The company flipped 40% of the properties it sold during a three-year span and accounted for 92% of the foreclosure filings in their county between 2017 and 2022.
- More than 2,000 properties were sold four times in a three-year span, according to the CFPB.
The Lawsuit: The company is accused of violating the Equal Credit Opportunity Act and the Interstate Land Sales Full Disclosure Act. Separately, the Justice Department is accusing the defendants of violating the Fir Housing Act.
- The suit seeks to stop the unlawful conduct, provide redress to affected individuals, and impose a civil penalty.
The Last Word: “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 of the Justice Department’s Civil Rights Division. “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.”
