Vanderbilt Mortgage & Finance, part of Warren Buffett’s conglomerate Berkshire Hathaway, has been accused by the Consumer Financial Protection Bureau (CFPB) of manipulating underwriting standards and setting borrowers up to fail in manufactured home loans.
The consumer watchdog on Monday filed a lawsuit in a U.S. district court in Tennessee against Vanderbilt for purported violations of the Truth in Lending Act and Regulation Z. Vanderbilt is a unit of the largest U.S. builder of manufactured homes, Clayton Homes Inc., a wholly owned subsidiary of Berkshire Hathaway.
“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” CFPB Director Rohit Chopra said in a statement. “The CFPB’s lawsuit seeks to not only protect homebuyers, but also honest lenders helping people to finance the purchase of an affordable home.”
A spokesperson for Berkshire Hathaway did not immediately reply to HousingWire’s request for comment. A representative at Clayton Homes said “Vanderbilt Mortgage is proud to serve families across the U.S. by making affordable homeownership a reality.” The company is now in the process of reviewing the CFPB’s complaint.
The lawsuit alleges that Vanderbilt disregarded evidence that borrowers did not have sufficient income or assets to repay their mortgage by using artificially low estimates of living expenses.
The lawsuit mentioned, for example, the estimated living expenses considered by the company in the underwriting process for some borrowers that were about half the average of self-reported living expenses for other similar Vanderbilt loan applicants.
After paying their mortgage, one family was left with $57.78 in monthly net income, the CFPB alleges. Another family had 33 debts in collection and two young children, falling behind only eight months after getting their loan. A single mother with two dependents missed a mortgage payment after only four months in the home due to the company’s actions, the CFPB alleges.
According to the CFPB, Vanderbilt “charged many borrowers additional fees and penalties when their loans became delinquent, and some eventually lost their homes.”
