CFPB sues Vanderbilt Mortgage & Finance, alleging predatory lending: NPR

The U.S. Consumer Financial Protection Bureau announced Monday that it is suing a Tennessee-based mortgage lender owned by Berkshire Hathaway, accusing the company of predatory practices aimed at steering borrowers into manufactured homes they could not afford. not afford.

The CFPB said Vanderbilt Mortgage & Finance often ignored evidence that borrowers could not afford the loans. Vanderbilt is a subsidiary of Clayton Homes, America’s largest producer of manufactured homes, which in turn is a subsidiary of Warren Buffett’s holding company, Berkshire Hathaway.

“Vanderbilt knowingly traps people into risky loans in order to make a deal on the sale of a manufactured home,” CFPB Director Rohit Chopra said in a statement. “The CFPB’s lawsuit aims to protect not only homebuyers, but also honest lenders who help people finance the purchase of an affordable home.”

Contacted for comment by NPR, a policy firm representing Vanderbilt said the CFPB’s lawsuit “is baseless and false, and constitutes the latest example of politically motivated regulatory overreach.”

“Vanderbilt Mortgage’s underwriting processes exceed legal requirements to evaluate a borrower’s ability to repay their loans by considering both monthly debt-to-income ratio and residual income,” he said. “Vanderbilt Mortgage goes further by taking the greater of the borrower’s reported actual expenses or estimated living expenses for family size, similar to that used by the federal VA loan program.”

The CFPB said Vanderbilt manipulated its own lending standards when borrowers did not have sufficient income to obtain a mortgage. He said the company used “artificially low estimates of living expenses” to approve borrowers who would not otherwise qualify. In one case, it “approved a loan for a family with 33 debts in collection and two young children. The borrowers fell behind just eight months after getting the mortgage,” the watchdog agency said.

Additionally, the CFPB said that when potential buyers failed to meet Vanderbilt’s own “overly optimistic estimates” of their ability to repay, the company still approved them in certain cases. In one case, Vanderbilt issued a mortgage to “a single mother with two dependents after determining she had insufficient income, then sent her loan into collections when she missed a mortgage payment after just four months in home,” the CFPB said.

Mike Calhoun, president of the Center for Responsible Lending, a nonpartisan nonprofit organization that promotes fairness in financial practices, says Vanderbilt has been on the organization’s radar for several years.

Calhoun says interest rates on loans for manufactured housing are typically 50 percent higher than for other types of housing.

These loans, he says, “are given to the most vulnerable home buyers and these people are already facing a number of difficult (financial) challenges” because of their generally lower incomes.

According to the Manufactured Housing Institute, a trade organization, the 2022 median household income for manufactured home buyers was $35,000. Nearly 113,000 such homes were built that year, representing about 11% of all new homes started. The average sales price for a manufactured home was $127,250 without land.

A 2016 report from the Center for Public Integrity cited Clayton Homes for lending at interest rates of 15 percent or higher while tacking on thousands of dollars in additional loan fees. It also said former Clayton dealers reported that the company “encouraged them to steer buyers toward financing with Clayton’s own high-interest lenders.”

At a Berkshire Hathaway annual shareholder meeting in 2015, Buffett defended Clayton Homes’ lending practices, saying he had “no excuses” for the way the company made loans, according to Reuters.