Judge blasts Colony Ridge settlement, declines oversight

• Key insight: The judge said the original complaint sought actual damages for Hispanic buyers steered into high-cost loans to buy undeveloped, flood-prone land.
• What's at stake: The settlement provided no compensation to the buyers allegedly harmed and instead allocated $48 million for infrastructure and $20 million for law enforcement.
• Expert quote: "The court finds it difficult to reconcile the Department of Justice's endorsement of this Settlement Agreement with the statutory purposes of the FHA and ECOA, which the Department of Justice is entrusted to enforce." — U.S. District Judge Alfred H. Bennett

A federal judge officially dismissed a civil suit against a Texas land developer, after the Department of Justice struck a $68 million settlement that the judge criticized pointedly.
On Tuesday, U.S. District Judge Alfred H. Bennett of the U.S. District Court for the Southern District of Texas filed a five-page order expressing concerns about retaining jurisdiction to enforce the settlement  agreement between the Justice Department and Houston land developer Colony Ridge. Bennett said the settlement failed to enforce antidiscrimination laws and provided no relief to harmed borrowers. The judge said the DOJ signed a settlement that instead redirected millions in infrastructure improvements that benefit the developer.

The judge had already expressed his opposition to the terms of the settlement. At a hearing on April 10, Bennett questioned the DOJ on why no relief was provided for alleged victims and instead, $20 million was set aside for police and immigration enforcement. Bennett told the DOJ at the time that he would not retain jurisdiction over the settlement. Harmeet K. Dhillon, DOJ's assistant attorney general in the civil rights division, voluntarily dismissed the case with prejudice and signed an out-of-court agreement with Colony Ridge. 

The Justice Department said it would proceed without court oversight, using a federal provision that does not require the court's involvement. It is unclear whether Colony Ridge borrowers will sue the developer on their own. The borrowers alleged the land was flood-prone, which forced families to spend on drainage improvements, and that the seller-financed loans were predatory, with interest rates of up to 13%, or three to five times market rates. 

Colony Ridge has countered by claiming there is no ability-to-repay requirement for land sales.

The original 2023 lawsuit was filed by the Consumer Financial Protection Bureau during the Biden administration. It alleged that Colony Ridge had targeted Hispanic borrowers through marketing that promised in Spanish: "Achieve the American dream here."  

The CFPB alleged that Colony Ridge steered borrowers into high-cost, seller-financed loans without regard for their ability to repay, setting borrowers up for default and foreclosure that the judge wrote "stripped borrowers of money and property." 

Bennett noted that the original suit alleged violations of two antidiscrimination statutes: the Fair Housing Act and the Equal Credit Opportunity Act. 

"The court finds it difficult to reconcile the Department of Justice's endorsement of this settlement agreement with the statutory purposes of the FHA and ECOA, which the Department of Justice is entrusted to enforce," Bennett wrote. 

The FHA — enacted in 1968 "at a moment of national urgency, in the immediate aftermath of Dr. Martin Luther King Jr.'s assassination" — was "a direct response to pervasive and systemic discrimination, both open and covert, that had long prevented minority families from accessing better housing and moving to integrated communities," he wrote. The Equal Credit Opportunity Act, of 1974, was also a remedial statute that prohibits discrimination in credit transactions.

"Statutes enacted to remedy discrimination and unequal access to credit and housing are not advanced by relief that bypasses the injured, defers the remedy, and redirects the benefit," he wrote. "More troubling still, the settlement agreement risks exacerbating harm to the very consumers the Complaint purported to protect."  

The settlement bore little resemblance to "the claims asserted in the complaint," Bennett wrote. Under the Trump administration, the CFPB was dropped from the complaint. The State of Texas had filed its own suit against Colony Ridge and at the April 10 court hearing, the DOJ admitted under questioning that Texas Attorney General Ken Paxton's office had suggested that millions be set aside specifically for immigration enforcement.

"Rather than compensating the borrowers allegedly harmed, the settlement agreement allocates $48 million for infrastructure improvements and $20 million "to increase law enforcement presence and effectiveness," he wrote. The law enforcement funds are intended, in part, to support immigration enforcement, he wrote. 

"Remedies should be tailored to the injury and the wrongs alleged," Bennett wrote. "Here, the settlement agreement addresses issues not pled and provides relief not sought. As such, retaining jurisdiction over this settlement agreement would require the Court to supervise obligations untethered to the violations alleged in the Complaint."

The judge also criticized informal relief efforts provided by Colony Ridge as "a remedy without teeth and a commitment without consequence."