A federal regulator on Monday sued a mortgage financing company owned by Warren Buffett's Berkshire Hathaway conglomerate, 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” signals that borrowers would be unable to repay the loans.
The consumer agency said Vanderbilt overlooked the fact that some borrowers were already falling behind on their debt obligations when the loans were issued.
“Vanderbilt knowingly locks people into high-risk loans to close the deal on the sale of a manufactured home,” said Rohit Chopra, director of the agency.
The lawsuit seeks to force Vanderbilt to change its practices, provide refunds to customers and pay an unspecified civil penalty.
Vanderbilt is a subsidiary of Clayton Homes, the nation's largest builder of manufactured homes, also known as mobile or prefab homes. Clayton also owns 21st Mortgage, which, like Vanderbilt, specializes in making loans to buyers of manufactured homes. All three companies are based in Tennessee.
The lawsuit did not include 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 examined 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 firms have drawn criticism over their sales and lending practices.
Their main customers tend to be lower-income residents of rural communities. Manufactured housing is often promoted as a path to homeownership for consumers with limited resources.
But the consumer agency said research has shown such loans often come with higher-than-normal interest rates and are difficult to refinance when 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 agency took a series of enforcement actions in the waning days of the Biden administration. Just before Christmas, it sued Rocket Homes, claiming 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 scammers from swindling money from customers using the money transfer app Zelle.
The agency, created in the wake of the financial crisis, has faced criticism from Republicans and the financial services industry for years. The Republican-controlled Congress and the Trump administration will likely try to rein in the consumer agency, and the administration could move to dismiss some of the last-minute lawsuits.
