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 Vanderbilt Mortgage issued a statement to HousingWire in which the company claims that “the CFPB’s lawsuit is unfounded and untrue, and is the latest example of politically motivated, regulatory overreach.”
The statement said that the bureau examined “tens of thousands” of loans from Vanderbilt over a six-year period and found that less than 1% should not have been made. Additionally, the company said that many of these potentially risky loans have not been delinquent.
“Vanderbilt Mortgage’s underwriting processes exceed the legal requirements for assessing a borrower’s ability to repay loans by considering both monthly debt-to-income ratio and residual income, while the law only requires the use of one or the other,“ the statement reads. “Vanderbilt Mortgage goes further by taking the greater of the borrower’s actual reported expenses or an estimated living expense for the family size, similar to that used by the Federal VA loan program.“
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.”
Editor’s note: This story was updated with comments from Vanderbilt Mortgage.
