As reported by Law360, the U.S. Department of Justice (DOJ) has decided to move forward with its $68 million settlement with Colony Ridge Development LLC without seeking court approval or ongoing judicial oversight. The settlement at issue (discussed here) resolves DOJ and Texas reverse redlining and predatory lending claims in exchange for extensive operational reforms and $48 million in infrastructure improvements plus $20 million in law enforcement and public-safety spending, but no civil money penalties or direct monetary relief to borrowers.
Judge Bennett’s Concerns
At a hearing in Houston last Friday, U.S. District Judge Alfred H. Bennett questioned whether the settlement’s structure was appropriate for a fair lending case, focusing on two issues in particular. First, he viewed as “problematic” a provision allowing the $20 million law-enforcement allocation to be used “primarily” to fund delegated immigration enforcement authority for local sheriff and constable offices, noting that he believed he was presiding over a reverse redlining case, not an immigration enforcement matter. Second, he pressed DOJ on what concrete, retroactive relief the agreement provides to existing homeowners, and DOJ confirmed there is no direct monetary compensation for residents, only forward-looking reforms to marketing, disclosures, underwriting, and community infrastructure.
DOJ’s Response
Rather than revise these provisions, DOJ told Judge Bennett it would dismiss the case and implement the agreement as a private settlement, thereby eliminating the need for a court order and removing the court’s ability to supervise compliance. In practical terms, the core terms we previously summarized remain intact — no civil penalties; new ability-to-repay and loss-mitigation standards; early rescission rights; bilingual and accurate disclosures; $48 million for drainage, roads, and utilities; and $20 million for law enforcement and public safety — but they will be enforced contractually by DOJ and Texas rather than through a consent decree subject to judicial review.
Our Take
As noted in our prior blog post, this settlement contains several immigration and law enforcement-related provisions that we have not seen in prior fair lending/fair housing settlements, reflecting priorities of the current administration. Furthermore, this development underscores several trends we noted in our earlier post. First, the current administration’s approach to fair lending enforcement remains focused on structural and community-level remedies, rather than on large civil penalties or direct restitution, even in cases involving serious reverse redlining allegations. Second, blending civil rights or fair lending remedies with immigration-focused law-enforcement funding can draw sharp judicial and advocacy scrutiny and may prompt the government to forego court supervision altogether. Finally, for land developers, mortgage lenders, and others using seller-financed structures in limited English proficiency communities, the case continues to highlight regulators’ expectations around ability-to-repay underwriting, accurate and bilingual marketing and flood-risk disclosures, and the willingness of federal and state enforcers to demand large infrastructure and public-safety investments as part of resolving fair lending claims.