In December 2023, we blogged about lawsuits filed by the Consumer Financial Protection Bureau (CFPB or Bureau), the U.S. Department of Justice (DOJ), and later the State of Texas against Colony Ridge and related entities. The complaints alleged that Colony Ridge targeted Hispanic borrowers with deceptive Spanish‑language marketing, sold largely undeveloped and flood‑prone land, and engaged in predatory financing by steering borrowers into high‑rate, seller‑financed mortgage loans with extremely high foreclosure rates.

The DOJ and CFPB alleged violations of the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), the Consumer Financial Protection Act (CFPA), and Interstate Land Sales Full Disclosure Act (ILSA). Texas alleged violations of the Texas Deceptive Trade Practices Act and other state and federal statutes.

Those cases have now been resolved through a comprehensive $68 million, three-year settlement agreement, filed February 10, 2026, between the United States, Texas, Colony Ridge entities, affiliated management companies, and a property owners’ association. The defendants deny any wrongdoing, but agree to significant operational, compliance, and infrastructure commitments in exchange for dismissal of the civil claims.

While the settlement contains standard terms, there are also some unusual provisions. For example, one of the provisions requires Colony Ridge to comply with the intrastate sales exception to the ILSA by “requiring purchasers to present an unexpired Texas-issued driver’s license, a Texas-issued identification card, a limited-term Texas-issued driver’s license issued after January 1, 2025 or an unexpired passport and valid visa issued or renewed after January 1, 2025.” In addition, the settlement requires that Colony Ridge spend an aggregate amount of $20 million to, among other things, increase law enforcement “presence and effectiveness” in the Terranos Houston Subdivision, including two additional full-time law enforcement officers and the purchase of law enforcement equipment, gear and vehicles for items and services associated with the property owners of Colony Ridge.

Notably, the settlement does not impose any civil monetary penalties, relying instead on prospective reforms and investment obligations. The settlement agreement also allows for early termination by the U.S. and Texas if Colony Ridge fulfills the terms of the agreement and “exhibit[s] a sincere and demonstrated commitment to future remediation” – presumably to avoid court approval.

The underlying litigation, filed in 2023, was DOJ’s first case to allege “reverse redlining” under the FHA and ECOA. By resolving those claims through this agreement, the DOJ appears to have reached its first new fair lending‑related settlement under the Trump 2.0 administration. Separately, the CFPB, which had originally joined the DOJ in suing Colony Ridge, moved this week to dismiss all of its claims in the litigation, consistent with the Trump‑era CFPB’s broader strategy of dismissing most preexisting enforcement actions and lawsuits.

Key Settlement Terms

Resolution of Claims (No Admission of Liability)
The settlement fully resolves the federal and Texas civil claims (Covered Claims) against Colony Ridge and related entities in the two pending cases, subject to court approval. The U.S. and Texas agree to move to dismiss with prejudice. The defendants expressly deny the allegations and state that their commitments are made solely to resolve the litigation. Criminal and certain other categories of liability are expressly preserved. The agreement also expressly reserves the government’s ability to pursue criminal, tax, environmental, and other non‑covered claims in the future.

Limits on New Development and Deed Restrictions
For three years, Colony Ridge generally may not seek final approval of new residential plats for direct‑to‑consumer sales, subject to narrow exceptions. After 24 months, any new plats must require construction or installation of a dwelling before sale to the end consumer. For three years, new subdivisions must include deed restrictions requiring compliance with county permitting and Architectural Control Committee approval, including basic exterior construction standards.

Underwriting, Default Avoidance, and Rescission Rights
Colony Ridge must adopt written underwriting standards (subject to DOJ non‑objection) that evaluate income, assets, debts, and ability to repay before making new lot loans. It must implement a “Default Avoidance Plan” that provides individualized assessments and specified relief options for borrowers facing foreclosure (e.g., forbearance, short‑term interest‑free assistance, refinancing, or transfer of notes).

The settlement also creates a rescission right: future borrowers may rescind a purchase up to the due date of the second payment, receive a refund of amounts paid (with limited deductions for documented remediation), and face no negative credit reporting for exercising that option. Colony Ridge must also propose steps to address past negative credit reporting related to its loans.

Advertising, Disclosures, and Non‑Discrimination
Colony Ridge must ensure that its advertising accurately reflects property conditions and loan terms, including utility access and flood risk, and may not describe properties as “move‑in ready” or having “all city services” unless that is factually accurate.

Before collecting fees or closing, Colony Ridge must provide clear pre‑sale disclosures on utility availability and costs, flood risk and grading responsibilities, when the buyer can take possession and begin permitting, and the total cost of the property (including interest and required fees). Key materials covered by the agreement must be provided in English and Spanish.

The settlement also includes a broad non‑discrimination commitment under ECOA, Regulation B, and the FHA, and requires an independent Compliance Specialist and annual fair‑lending training for relevant staff.

$48 Million in Infrastructure and $20 Million for Law Enforcement

Colony Ridge must fund a $48 million General Infrastructure Improvement Plan focused on the “Terrenos Houston” subdivisions. At least $18 million is earmarked for drainage and flood‑control improvements overseen by an independent engineering firm; the remaining $30 million is for roads, water and sewer, and related projects to improve habitability and public safety, with a completion timeline of up to 10 years. Funds cannot be used to perform work that is the legal responsibility of Liberty County or other government entities.

Separately, defendants must spend $20 million over up to 10 years to increase law‑enforcement presence and effectiveness in the area (e.g., potential substation construction, additional officers, equipment). Any unspent funds after 10 years must be redirected to public‑safety‑related infrastructure.

Our Take

To our knowledge, this is the first settlement of a fair lending lawsuit by the DOJ under the current administration. However, it is not a standard settlement to resolve reverse redlining claims. Instead, the terms of the settlement appear to reflect DOJ’s view that Colony Ridge engaged in a predatory scheme that encouraged illegal immigration by Hispanic borrowers. In the DOJ’s press release announcing the settlement, Assistant Attorney General Harmeet Dhillon stated that “DOJ will go after all lenders, financiers, and land developers who participate in schemes which ultimately encourage illegal immigration.” The identification requirement and law enforcement provisions also support the DOJ’s viewpoint and align with the current administration’s crackdown on immigration.

For land developers and mortgage lenders, especially those using seller‑financed structures and marketing to limited English proficiency communities, the agreement highlights regulatory expectations concerning:

• Meaningful ability‑to‑repay underwriting and loss‑mitigation processes;
• Accurate, bilingual marketing and disclosures about infrastructure and flood risk;
• Structured foreclosure practices and borrower rescission rights; and
• Substantial investment in infrastructure and public safety where past practices allegedly created elevated risks.

At the same time, the absence of civil penalties and the CFPB’s decision to walk away from its own claims underscore how fair lending enforcement has shifted in the current administration toward structural, forward‑looking remedies and away from aggressive monetary sanctions.