- Key insight: Eight civil rights nonprofits have urged a federal court to reject a proposed settlement between the Department of Justice and developer Colony Ridge, arguing an immigration enforcement clause in the settlement is "unlawful."
- What's at stake: The underlying lawsuit targeted a "foreclosure mill" that sold undeveloped, flood-prone land to Hispanic buyers at 10% to 12% interest rates.
- Supporting data: The civil rights groups slammed the settlement for offering zero direct restitution to thousands of borrowers, instead funneling $20 million to immigration enforcement.
Civil rights groups have asked a federal court to reject a proposed
On Monday, eight civil rights and fair housing groups
Colony Ridge Development offered seller-financed mortgages on vacant lots on the outskirts of Houston. The core civil rights claims centered on the company's predatory "bait-and-switch" lending scheme that intentionally targeted Hispanic borrowers with high-interest loans and deceptive marketing. The original suit had alleged that the developer was a "foreclosure mill," because the company initiated foreclosures on at least 30% of all its seller-financed lots within three years of the consumer's purchase date.
The brief, filed in the U.S. District Court for the Southern District of Texas, alleges the settlement is improper, fails to provide meaningful relief to the victims and could subject borrowers to heightened surveillance, detention, family separation, or deportation.
Last week, the DOJ and Texas' Attorney General Ken Paxton
At a hearing on Friday, Judge Bennett required the DOJ's lead counsel to appear in-person for another hearing, at a date and time to be determined.
Attorneys who specialize in fair lending work said they had never seen a settlement entered into by the DOJ's Civil Rights Division that resolved allegations of discrimination but failed to provide any remedy or compensation to harmed individuals. Colony Ridge did agree under the deal to adopt standard underwriting practices and truthful disclosures regarding flood risks and utility access.
Still, the groups assert the settlement fails to uphold the objectives of the Fair Housing Act and the Equal Credit Opportunity Act. The nonprofits, led by the National Fair Housing Alliance, have asked the court to deny the plaintiffs' motion to dismiss the case with prejudice, and to "independently assess the reasonableness" of the settlement.
Under the deal with the DOJ, Colony Ridge agreed to pay $48 million to improve infrastructure, particularly drainage of flood-prone lots that lacked water, sewer or electrical hookups. But no money was earmarked for harmed borrowers and, in an unusual twist, the DOJ required that the private developer pay $20 million to fund two police officers, build a law enforcement facility and create a "peace officer" residency program.
The CFPB has quietly been dropped from the settlement because the agency under the Trump administration has turned over fair lending enforcement to the DOJ.
The DOJ wants the court to approve the settlement allocating $20 million toward law and immigration enforcement —a move that aligns with the Trump administration's focus on border security but has drawn sharp criticism from civil rights advocates.
The groups urged the district court to reject the motion to dismiss the case with prejudice or to strike a so-called "immigration enforcement funding clause," from the agreement. That clause, the groups claim, "is intended to support 'additional delegated immigration enforcement authority from the federal government' in the [development's] subdivisions, construction of a law enforcement sub-station, financial support of two officers to patrol the development, and law enforcement equipment."
"The Clause is unrelated to the facts and legal claims alleged and is an insult to the vulnerable community that was targeted by this predatory scheme," the groups stated. "The Agreement as a whole does not provide relief appropriate for the injuries alleged. Instead, the Clause appears intended to subject them to heightened surveillance, and, for some, could subject them to potential detention, family separation, or even deportation — prioritizing the Government's unrelated political priorities over the victims' interests."
The eight nonprofits include the National Consumer Law Center, UnidosUS, Public Justice, Center for Responsible Lending, Poverty and Race Research Action Council, Southern Poverty Law Center, and League of United Latin American Citizens.
