In the settlement, Colony Ridge “expressly deny any wrongdoing as alleged by the United States or the State of Texas in the Complaints or that could have been alleged.” A company spokesperson did not immediately reply to HousingWire‘s request for comment.
Federal agencies said Colony Ridge used misleading sales tactics, including misrepresentations about flooding risks, and failed to verify borrowers’ ability to repay, which contributed to high foreclosure rates.
The settlement reached with the DOJ, CFPB and Texas OAG marks the DOJ’s first predatory mortgage lending case and the CFPB’s first federal court lawsuit involving the Interstate Land Sales Full Disclosure Act (ILSA).
Under the agreement, Colony Ridge is expected to invest $48 million in infrastructure improvements, including $18 million for drainage to mitigate flood damage. The company must also adopt underwriting standards that assess borrowers’ ability to repay and implement policies aimed at reducing foreclosures.
An additional $20 million will be used to increase law enforcement presence in the developments and ensure compliance with local, state and federal requirements, according to the settlement.
The company is also required to use ILSA’s intrastate land sales exemption and require purchasers to present valid identification, such as a Texas-issued driver’s license or ID card; a limited-term Texas driver’s license issued after Jan. 1, 2025; or an unexpired passport with a valid visa issued or renewed after that date.
“The changes required by this settlement will promote public safety, and affordable and sustainable homeownership in America, key priorities of this Administration,” Harmeet K. Dhillon, assistant attorney general of the DOJ’s Civil Rights Division, said in a statement.
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