Colony Ridge Settlement Endangers – Rather than Vindicates – the Civil Rights of Victims

A settlement for predatory, discriminatory loans targeting Hispanic families denies compensation to those victims while steering $20 million to immigration enforcement. That is not justice.

In late 2023, the DOJ’s Civil Rights Division joined CFPB in suing Colony Ridge, a collection of subdivisions near Houston, Texas. The government announced it would seek restitution for the victimized residents, almost all Latino people, who had been ripped off by a predatory lending scheme.

This case represented some of the most important work the Division’s Housing and Civil Enforcement Section was created to do: protect the rights to access housing free from discrimination, and obtain credit on an equal basis regardless of race or ethnicity. I know this well, as a veteran of the Division’s Appellate Section – where I worked on many cases with the Housing Section – as well as the Department of Housing and Urban Development, which works closely with the Division on housing discrimination cases.

Things veered from the expected course when the Trump Administration recently announced it reached a major $68 million settlement with Colony Ridge. Like so many in the civil rights and fair housing community, I was dismayed to learn the terms of the settlement provided no relief to the victims. What’s worse is that the settlement would further endanger the civil rights of many of these residents who were left financially devastated.

Colony Ridge sold thousands of lots of land at exorbitant interest rates, well over 10 percent, to people who wanted their share of the American Dream but couldn’t qualify for conventional loans. It misled them about the quality of those lots, which frequently lacked basic infrastructure such as utility or sewer connections and had high flooding risk, making it prohibitively costly to build and maintain habitable dwellings. More than 30 percent of these loans were in foreclosure within three years of purchase. Colony Ridge then resold the lots and started the cycle again. This scheme was advertised primarily in Spanish-language media and otherwise directed at Latino borrowers. As the court found when it rejected a motion to dismiss, these allegations constituted “reverse redlining.” Reverse redlining refers to predatory action taken to target a specific group with exploitative financing opportunities. It is barred by the Fair Housing Act of 1968 and the Equal Credit Opportunity Act.

The settlement does look to improve the under-resourced community by requiring Colony Ridge to put $40 million toward infrastructure improvements, and it orders the entity to avoid some predatory aspects of the scheme going forward.

But here’s where things take a turn: rather than requiring restitution to the victims, the settlement requires Colony Ridge to invest $20 million in beefing up law enforcement – including immigration law enforcement.

This subjects the very population victimized by the fraudulent scheme to increased risk of detention, family separation, or even deportation. This term of the settlement has nothing to do with the facts of this lawsuit, which never raised issues with inadequate law enforcement. It has even less to do with fair lending laws. What’s clear is the Civil Rights Division under the current administration has little appetite to pursue vigorous enforcement of fair housing and fair lending laws, and is willing to inject its inhumane immigration agenda into wholly unrelated enforcement areas.

For Division alums like myself, it is disheartening to see the Civil Rights Division deploy its power and hard-won moral authority in the service of nakedly political objectives unrelated to – and, indeed, potentially in conflict with – ensuring the protection of civil rights.

The Division already has lost most of its attorneys, including in its Housing and Civil Enforcement Section. It has scaled back its enforcement of the Fair Housing Act and the Equal Opportunity Credit Act. It has refused to move forward even with cases involving the most egregious intentional discrimination. Instead, the Section has spent much of its time in the Trump Administration trying to undo consent decrees it reached in the previous administration to remedy the redlining of Black and Latino neighborhoods – efforts that fair housing advocates have vigorously and often successfully opposed.

In the short term, we must continue to oppose what amounts to a rollback of civil rights protections by the Division. A coalition led by the National Fair Housing Alliance (my current employer) and represented by Democracy Forward and Relman Colfax PLLC filed an opposition to the Division’s motion for the court to rubber-stamp its settlement. We argued that the court should not put its imprimatur on – and agree to enforce – settlement provisions unrelated to the civil rights that the case was supposed to vindicate. Upon reviewing our brief, the judge said he had “serious questions” about the settlement and required the Division to appear in person in his courtroom to answer them.

Protection of civil rights, including fair housing and fair lending rights, is one of the most important functions of the federal government. Until now, that has transcended partisanship to a great degree.

While Republican and Democratic administrations have prioritized different cases, both have deployed the Civil Rights Division in ways consistent with its storied mission – a mission the current administration has largely abandoned.

As alumni, we are committed to stepping up and fighting for the civil rights of every American at a time when the federal government has essentially abdicated that role. We long for a day when the Civil Rights Division will once again adhere to the basic values that have guided it for generations.

In the meantime, we at NFHA and others in the civil rights community will be closely watching what happens in the Colony Ridge case and fighting for an outcome that centers restitution for the victims.

This case should be about people who wanted to achieve the dream of homeownership and had their civil rights violated, not an unrelated immigration enforcement agenda. We need leadership at the Justice Department to remember that.

Sasha Samberg-Champion served as an appellate attorney in the Civil Rights Division from 2010 to 2014 and currently works as Special Counsel for Civil Rights for the National Fair Housing Alliance.