In December 2023, the U.S. Justice Department sued a Texas land developer it accused of duping tens of thousands of Hispanic residents into predatory mortgages, a landmark case for the Biden administration.

Colony Ridge, which sold plots in massive subdivisions north of Houston, had become a “one-stop shop for discriminatory lending,” Kristen Clarke, assistant attorney general for civil rights, said at a news conference announcing the lawsuit. The developer targeted Hispanic applicants through false advertising and persuaded them to take out high-interest loans that many could not afford, then benefited when it foreclosed on their properties, the lawsuit alleged.

“Our goal at the end of the day is to ensure that victims are compensated for their loss,” Clarke declared.

Three years later, the Trump administration and Colony Ridge are on the verge of resolving the case. But the $68 million proposed settlement provides no money for victims of the alleged scheme. Instead, it sets aside $20 million for policing and immigration enforcement — a provision that may be used to target the very people who were victimized by the developer, according to former government officials who worked on such cases.

“I’ve never seen a settlement like this, with a complete misalignment between what you’re settling and what the resolution is,” said Elena Babinecz, who led fair lending investigations at the Consumer Financial Protection Bureau for 12 years under the Obama, Trump and Biden administrations, before leaving in October.

“It’s a slap in the face to the individuals that were harmed; that the Justice Department acknowledges were harmed,” said Babinecz, who was at the bureau when it joined the Justice Department in filing suit against Colony Ridge. “It’s a complete misjustice, and it’s not at all why these civil rights laws were passed.”

Seven other attorneys and investigators who formerly enforced the federal government’s lending and housing civil rights laws also told ProPublica and The Texas Tribune that they were stunned by the agreement, which a U.S. district judge must still approve. Indeed, Colony Ridge is the largest Justice Department case since at least 2018 in which the settlement includes no monetary compensation for victims. The judge has scheduled a hearing on Friday over the proposal.

A coalition of fair housing and civil rights groups has urged the court to reject the settlement, arguing the lawsuit is the only realistic prospect for many consumers to get recompense because they cannot afford private attorneys.

The Justice Department had built a case against Colony Ridge with “stark and overwhelming evidence,” Clarke told the news organizations. Prosecutors said Colony Ridge repeatedly misled consumers about the condition of lots they purchased, forcing them to spend hundreds or thousands on drainage improvements and utility connections they hadn’t known the land needed. This contributed to consumers defaulting on high-interest loans, according to the lawsuit. Colony Ridge then benefited from the improvements made to the land it foreclosed on and resold the lots at higher prices.

In the end, tens of thousands of victims were exploited through the developer’s predatory practices in a span of eight years, the government argued. Colony Ridge repossessed more than 15,000 lots, many owned by immigrants, a 2023 investigation by the Houston Landing found.

Of the 183 housing and civil enforcement Justice Department settlements since 2018, only 6% did not include money for victims. Each of those cases was smaller in scope than Colony Ridge. They included a suburban Maryland car dealership accused of racial discrimination in loan offers over a seven-month period and a California landlord who allegedly refused to provide handicapped parking to one tenant.

None of the settlements — except for Colony Ridge — includes funding for police or immigration enforcement.

As federal investigators built a case around how Colony Ridge had treated its largely immigrant customers, conservative media and politicians aligned with Trump — who had made immigration enforcement a cornerstone of his campaign — did not focus on how consumers had been harmed. They instead accused the development of being a haven for immigrants.

They claimed, without providing evidence, that the development was a base for Mexican drug cartels and a “no-go” zone for police. Local law enforcement disputed the assertions, saying that violent crime there was no different from other neighborhoods in and around Houston. State legislative panels convened to investigate the allegations also fizzled out after they were unable to substantiate such claims.

Neither the federal government nor a lawsuit filed by Texas Attorney General Ken Paxton months later raised public safety concerns or a need for more policing or immigration enforcement.

The Justice Department declined to comment and did not respond to the concerns raised by former employees and people involved in the case. Paxton’s office did not respond to multiple emails. But while announcing the settlement in February, Harmeet K. Dhillon, who leads the department’s Civil Rights Division, argued that Colony Ridge had encouraged illegal immigration by targeting Hispanic consumers with the bait of affordable homeownership. “This DOJ will go after all lenders, financiers, and land developers who participate in schemes which ultimately encourage illegal immigration,” she said. In his own news release about the settlement, which would also resolve the Texas suit, Paxton focused primarily on funding set aside for immigration enforcement. “Under my watch, Texas will never be a sanctuary for illegals,” he said.

The focus on immigration makes the lives of those who were harmed more difficult, said Catherine Bendor, a manager in the Justice Department’s Housing and Civil Enforcement Section for eight years until 2024.

“Even if they’re citizens, they’ll likely be hassled by immigration agents who target people based on appearance or accent,” she said.

John Harris, Colony Ridge’s CEO, declined to be interviewed. The settlement does not include an admission of wrongdoing. He has long maintained that his company, which started in 2011 and offered mortgages for as little as a 1% down payment, has not preyed on its customers.

The financing terms helped the development grow rapidly, albeit inconsistently, with neat modular homes, trailers and abandoned or vacant lots across more than 33,000 acres. Matt Rascon, a spokesperson for Colony Ridge, said the company “found success offering a path to land ownership through flexible financing options with no credit checks.” His comments echoed the company’s argument in court that it created a path to homeownership for thousands of lower-income consumers whom risk-averse banks reject.

Offering loans when others wouldn’t is the most common argument predatory lenders make to justify their practices, said Nathalie Martin, a University of New Mexico law professor who has studied high-cost loans.

“You can see from this situation, it doesn’t help people to get them into loans that are more costly than they need to be,” Martin said.

Former federal officials and Colony Ridge property owners acknowledge that the settlement includes some provisions to protect consumers in the future. It would require Colony Ridge to adopt stricter lending standards and allow buyers to back out of purchases without penalty within two months. The developer would also make $48 million in infrastructure upgrades and provide transparent, bilingual marketing and communication.

Another provision bars Colony Ridge from developing new lots to sell for three years. But the agreement exempts 674 acres that the developer has already subdivided.

The concessions are helpful but inadequate because they miss a clear opportunity to help victims recover money they lost, which is a key reason such cases are filed, said Jon Seward, who was principal deputy chief for the Justice Department when he left in May 2023 after 17 years in its Housing and Civil Enforcement Section.

One such victim was Maria Acevedo, who describes herself as a lifelong Republican and U.S. citizen who said she voted for Trump three times.

A former land developer herself, Acevedo took out a high-interest $40,000 loan in 2018 to buy a half-acre of land where she planned to retire. She then spent an additional $60,000 on surveying, engineering and adding dirt to protect against flooding.

Acevedo said she planned to refinance her loan but learned that she couldn’t because the property had a lien from a previous owner. Colony Ridge foreclosed on the property three years later, even though Acevedo said she was making payments. Colony Ridge did not comment on Acevedo’s case or those of other individuals in this story. The foreclosure ruined her retirement plans, Acevedo said, adding that the challenges strained her marriage and eventually led to divorce.

She considered finding a lawyer to sue. But she said she decided to “become a team player” and serve as a government witness after federal investigators pledged to help victims like her recover what they lost.

Now, Acevedo said, she feels betrayed by a settlement that ignores Hispanic consumers like her.

“I know we were targeted. A blind man could see it,” Acevedo said. 

She added that the lawsuit was “going smooth, but once the Trump administration came in and took it over, it changed.”

Even if she could now find a lawyer, her window to file a lawsuit has expired because state and federal laws require they be brought within five years.

Since returning to office, the Trump administration has abandoned an $80 million settlement with Navy Federal Credit Union over illegal overdraft fees, which allowed the bank to continue operating without penalty, and halted dozens of investigations, including a case accusing a major Pennsylvania lender of defrauding student borrowers. Both defendants have denied wrongdoing.

The Trump administration and White House budget director Russell Vought have taken aim at the CFPB, which was formed to protect consumers from getting ripped off by businesses. For Vought, the agency was an example of government overreach. It was also one of the first targets for Trump’s Department of Government Efficiency. In April, in response to a lawsuit by bureau employees over the CFPB’s attempt to lay off 90% of its staff, the administration offered a compromise proposal: slashing two-thirds.

The White House and Vought’s office declined to comment, but the administration has argued the agency was needlessly aggressive and wasteful.

The shift away from pursuing consumer protection cases gives the impression that the federal government is no longer serious about protecting regular people from unscrupulous businesses,  former Justice Department and CFPB employees said.

Investigators spent months gathering stories and building trust with residents who were wary of cooperating, said Johnathan Smith, a former deputy assistant attorney general for civil rights during the Biden administration, who visited the development before the lawsuit. The team worked to ensure that the community “believed something was going to be different because the Justice Department got involved.”

“It’s just heartbreaking how the settlement failed to meet that mark,” he said.

SuEllen Sanchez and her sister, Keilah Sanchez, were among those who shared their stories with investigators, expecting the government would help them reclaim what they lost. They also provided investigators with hundreds of records from neighbors who said they’d been scammed.

A U.S. citizen born in Puerto Rico, SuEllen Sanchez had purchased five lots in Colony Ridge in 2020. She saw it as a way to invest money she’d earned as an aesthetician and perhaps open a business there.

Sanchez said the advertisements and sales representatives for Colony Ridge led her to believe the lots would be ready to build on. They weren’t. Clearing the land for development, acquiring permits and connecting utilities cost her more than $10,000. Colony Ridge foreclosed on one of the lots in 2021, according to Sanchez, who disputes the developer’s claims that she had missed loan payments.

Sanchez wondered if others also believed they’d been scammed. That’s when she and her sister, a web developer who also had purchased Colony Ridge properties, launched a website asking residents to share their experiences with the developer.

Sanchez said she was dismayed that all of their efforts resulted in the proposed settlement.

“These were consumer-based lawsuits, so you would think they’d actually do something for consumers with everything that they stipulated that this company did wrong,” Sanchez said. “There’s no way somebody who has all these violations should still be operating.”

Acevedo feels the same way, and she wants the judge to know it as he mulls the settlement. She doesn’t have a lawyer, but after the Justice Department proposed it, she filed a legal brief in the case demanding compensation as a victim. She offered to testify and present evidence.

“I want the court to hear me directly,” she wrote to Judge Alfred H. Bennett. “I am willing to swear to my experience.”

On Friday, she plans to drive 30 miles to Courtroom 9A in the Houston federal building for the settlement hearing, hoping for the judge to grant her request to be heard.