A federal regulator sued a mortgage finance firm owned by Warren Buffett’s Berkshire Hathaway conglomerate on Monday, claiming it made loans to buyers of manufactured homes that it knew they could not 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” signs that borrowers would not be able to repay the loans.
The consumer bureau said Vanderbilt overlooked that some borrowers were already falling behind on debt obligations when the loans were issued.
“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” said Rohit Chopra, the bureau’s director.
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 country’s largest builder of manufactured homes, sometimes called mobile or prefab houses. Clayton also owns 21st Mortgage, which like Vanderbilt specializes in writing loans to buyers of manufactured homes. All three companies are based in Tennessee.
The suit did not include 21st Mortgage. A spokeswoman for the regulator declined to comment.
Christina Honkonen, a spokeswoman for Vanderbilt, said in a statement: “The C.F.P.B.’s lawsuit is unfounded 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 issues.
Over the years, Clayton Homes and its mortgage firms have drawn criticism for sales and lending practices.
Their main customers tend to be lower-income residents of rural communities. Manufactured housing is often promoted as a pathway to homeownership for consumers with limited means.
But the consumer bureau said its research found that such loans often come with higher-than-normal interest rates, and are difficult to refinance when rates decline.
The regulator said many of Vanderbilt’s borrowers were not able to keep up with the 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 has brought a flurry of enforcement actions in the waning days of the Biden administration. Just before Christmas, it sued Rocket Homes, claiming the firm paid kickbacks to real estate brokers to steer borrowers to Rocket Mortgage, an affiliated company. Also in December, it sued three big banks, accusing them of fraud for failing to stop scammers from swindling money from customers using the money-transfer app Zelle.
Created in the aftermath of the financial crisis, the bureau has drawn criticism for years from Republicans and the financial services industry. The Republican-controlled Congress and 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.
