Texas Housing Developer Accused of Preying on Hispanic Buyers

Earlier this year, a sprawling residential development northeast of Houston catering mainly to Hispanic buyers, including undocumented migrants, came under fire from Texas Republicans who said the promise of homes there attracted migrants crossing illegally from Mexico.

But in an unexpected twist on Wednesday, it was the Biden administration that filed suit against the developer, Colony Ridge, for what the Justice Department and the Consumer Financial Protection Bureau said were predatory lending and dishonest sales practices that took advantage of predominantly Hispanic buyers.

“Colony Ridge promised the American dream, but we allege that in reality, it has delivered a nightmare for thousands of hardworking Hispanic families,” Kristen Clarke, assistant attorney general of the Justice Department’s Civil Rights Division, said in a statement announcing the suit.

Federal prosecutors said that the growth of Colony Ridge was fueled by a strategy of illegally targeting and pressuring Hispanic buyers with little or no credit. The Justice Department also accused the developers of offering financing without verifying the ability of buyers to pay, charging interest rates that “routinely exceed typical prevailing rates” and reselling the properties rapidly in cases of foreclosure.

John Harris, one of the owners of Colony Ridge, denied the allegations in the federal lawsuit, which he said he had only learned about after they were made public on Wednesday.

“We’re confident that there’s no foundation there at all,” he said in a telephone interview. “We’re proud of what we do for our customers. We have a good relationship with our customers. I think that it’s baseless.”

Colony Ridge spent much of the fall defending itself in front of Republican lawmakers in Texas. Gov. Greg Abbott made the development a topic for two consecutive special legislative sessions after stories and segments in right-wing news outlets such as The Daily Wire and Fox News drew a connection between the development and the surge in migrant arrivals at the border.

“We’re taking this very seriously,” Mr. Abbott said in an interview on Fox News in September, the same month that the ultraconservative Lt. Gov. Dan Patrick toured Colony Ridge on the ground and by flying overhead in a state police helicopter.

During hearings at the Texas Capitol in October, legislators heard testimony about flooding and other issues in the development. But lawmakers did not take action beyond allocating millions in additional funding for law enforcement in the area. On Monday, Mr. Abbott signed the funding into law.

Mr. Harris said that he felt as if his business was misunderstood and being misrepresented by both sides of the political spectrum.

“I’m either the guy that’s running the underground railroad to bring illegals, or I’m the guy that’s mistreating poor people,” he said. “It seems like no matter which side you’re on, you get to attack me if you want.”

The development has grown rapidly since it first began selling properties more than a decade ago on plots cut out of dense forest about 30 miles from downtown Houston. It is now home to well over 40,000 residents spread across several separate subdivisions.

Mr. Harris and his co-owners have said that they plan to build more, and they expect that the development will eventually more than double its current size.

The influx of new residents to rural Liberty County, where the development is, has already strained local resources, particularly the schools, and inflamed tensions with the nearby town of Plum Grove, whose residents objected to the increased traffic and blamed Colony Ridge for damage to local roads, flooding and crime.

In the lawsuit filed on Wednesday, prosecutors accused Colony Ridge of deceptive practices and discrimination in violation of federal housing and consumer finance law.

They said that the developer initiated foreclosures on at least 30 percent of the properties within three years of having sold them. From 2021 to 2022, the number of foreclosures in Liberty County surpassed the numbers in Dallas and San Antonio, according to the complaint.

Colony Ridge also used Spanish marketing materials that misrepresented the properties in its Terrenos Houston subdivisions, prosecutors said, promising connections to water, sewer and electricity that were not present at the time of purchase. The company disclosed that fact in paperwork provided only in English, they said.

According to the prosecutors, Colony Ridge recorded more than 28,000 transactions in the Terrenos Houston subdivisions over a five-year period, and more than 90 percent involved at least one Hispanic consumer.

The suit also named companies affiliated with Colony Ridge, as well as Loan Originator Services LLC, a mortgage company that, prosecutors said, originated all of the seller-financed loans for Colony Ridge.

Mr. Harris acknowledged in the telephone interview that not all the properties had water and sewer lines when they were sold. “But we have a timeline, and people know,” he said, adding that electric connections were controlled by the power company.

“Look, I do it to make money, but the people matter to me a lot,” he said. “The truth will come out in the end.”