A federal judge in Texas dismissed with prejudice a high-profile discrimination lawsuit against Colony Ridge Development while sharply criticizing a proposed settlement agreement that would have directed millions of dollars toward infrastructure and immigration enforcement rather than compensating alleged victims.
In an order filed on April 28 in the U.S. District Court for the Southern District of Texas, Judge Alfred H. Bennett said the proposed settlement between the Consumer Financial Protection Bureau (CFPB), the Department of Justice (DOJ) and Colony Ridge “bears little relationship to the claims asserted in the complaint.”
The CFPB and DOJ sued Colony Ridge in 2023, alleging the developer violated the Equal Credit Opportunity Act and Fair Housing Act by targeting Hispanic consumers with predatory seller-financing practices. The case was the first predatory mortgage lending case brought by the DOJ and was the CFPB’s first federal court lawsuit related to the Interstate Land Sales Full Disclosure Act.
Actions led to widespread defaults and foreclosures, per lawsuit
The lawsuit alleged borrowers were funneled into high-cost loans without meaningful assessments of their ability to repay, contributing to widespread defaults and foreclosures.
Federal regulators alleged Colony Ridge issued high-interest seller-financed loans without verifying borrowers’ income, debts or other financial obligations, while marketing the loans as requiring no credit checks and promoting that “everyone qualifies.”
According to the complaint, roughly 91% of nearly 28,500 transactions recorded between 2017 and 2022 involved at least one Hispanic consumer, even though Hispanic residents accounted for about 38% of the Houston metropolitan area’s population.
The government also alleged Colony Ridge misrepresented whether lots included access to water, sewer and electrical infrastructure, while failing to disclose flooding risks and the substantial costs buyers could face to prepare the land for residential construction.
The lawsuit further alleged that Colony Ridge initiated foreclosures on at least 30% of its seller-financed lots within three years of purchase and routinely resold foreclosed properties at higher prices.
No direct compensation to borrowers allegedly harmed
In the April 28 order, Bennett wrote that the proposed agreement, which was presented at an April 10 hearing, would have allocated $48 million for infrastructure improvements and $20 million to “increase law enforcement presence and effectiveness,” including support for immigration enforcement. Bennett wrote that the settlement failed to provide direct compensation to borrowers allegedly harmed by the company’s practices.
“Remedies should be tailored to the injury and address the wrongs alleged,” Bennett wrote, adding that the agreement addressed issues “not pled and provides relief not sought.”
Bennett also expressed concern that increased immigration enforcement could further marginalize the Hispanic consumers the lawsuit was intended to protect. He said the settlement “risks exacerbating harm to the very consumers the complaint purported to protect.”
Following the April 10 hearing, the parties filed a joint stipulation dismissing the case with prejudice and withdrew their request for the court to retain jurisdiction over the settlement agreement. Bennett said the dismissal was effective upon filing and denied the earlier joint motion for dismissal as moot.
The order noted that the parties remain free to resolve the matter privately, but Bennett declined to “put its imprimatur on a Settlement Agreement that does not meaningfully resolve the claims presented.”
Back in February 2026, Colony Ridge agreed to pay $68 million to settle allegations of predatory practices against Hispanic borrowers, with part of the funds to be used to support immigration-related law enforcement.
Neither Colony Ridge nor the CFPB and DOJ responded to HousingWire’s requests for comment at the time of publication.
