A federal regulator sued a mortgage finance company owned by Warren Buffett’s Berkshire Hathaway Group on Monday, alleging it made loans to buyers of manufactured homes it knew they couldn’t afford.
The civil suit, filed in federal court in the Eastern District of Tennessee by the Consumer Financial Protection Bureau, said Vanderbilt Mortgage and Finance ignored “clear and obvious” indications that borrowers would be unable to repay the loans.
The consumer bureau said Vanderbilt overlooked that some borrowers were already delinquent on their debt obligations when the loans were issued.
“Vanderbilt knowingly traps people in risky loans to close the deal on the sale of a manufactured home,” said Rohit Chopra, director of the office.
The lawsuit seeks to force Vanderbilt to change its practices, provide restitution to customers and pay an unspecified civil penalty.
Vanderbilt is a subsidiary of Clayton Homes, the nation’s largest developer of manufactured homes, sometimes called mobile or prefabricated homes. Clayton also owns 21st Mortgage, which, like Vanderbilt, specializes in underwriting loans to buyers of manufactured homes. All three companies are based in Tennessee.
The suit did not involve the 21st Mortgage. A spokeswoman for the regulator declined to comment.
Christina Honkonen, a spokeswoman for Vanderbilt, said in a statement: “The CFPB’s lawsuit is baseless and untrue and is the latest example of politically motivated, regulatory overreach.” Regulators reviewed tens of thousands of Vanderbilt loans, the statement added, and “identified less than 0.8 percent” that may have had problems.
Over the years, Clayton Homes and its mortgage companies have come under fire for their sales and lending practices.
Their primary customers tend to be lower-income residents of rural communities. Manufactured homes are often promoted as a path to home ownership for consumers of limited means.
But the consumer bureau said its research found such loans often come with higher-than-normal interest rates and are difficult to refinance when interest rates fall.
The regulator said many of Vanderbilt’s borrowers were unable to keep up with monthly payments and were charged late fees and penalties. In some cases, borrowers faced foreclosure and lost their homes.
In announcing the lawsuit, the agency provided a link to complaints filed by Vanderbilt customers.
The bureau brought a series of enforcement actions during the days of the Biden administration. Just before Christmas, she sued Rocket Homes, alleging the company paid kickbacks to real estate agents to steer borrowers to Rocket Mortgage, an affiliate. Also in December, it sued three major banks, accusing them of fraud for failing to stop fraudsters from stealing money from customers using the Zelle money transfer app.
Created in the wake of the financial crisis, the bureau has been criticized for years by Republicans and the financial services industry. The Republican-controlled Congress and the Trump administration are likely to try to rein in the consumer bureau, and the administration could move to dismiss some of the last-minute lawsuits.
