US regulator sues Berkshire-owned lender for making risky home loans, no red flags Reuters
By Jonathan Stempel
(Reuters) – The U.S. Consumer Financial Protection Bureau sued a lender owned by Warren Buffett’s Berkshire Hathaway (NYSE: ) on Monday, accusing it of pushing borrowers into unaffordable mortgages to buy homes from Clayton Homes, Berkshire’s homebuilder.
Vanderbilt Mortgage and Finance, a unit of Clayton, allegedly ignored “clear and obvious signals” that borrowers could not afford their loans and failed to properly assess borrowers’ ability to pay other debts and keep food on the table.
The CFPB said that violated rules imposed after the 2008 global financial crisis that required mortgage lenders to verify borrowers’ incomes and make good-faith decisions about borrowers’ ability to repay.
According to the regulator, many Vanderbilt borrowers faced late fees and penalties when they defaulted on payments and had their homes repossessed or filed for bankruptcy after their loans defaulted.
In one case, Vanderbilt approved a home loan for a couple with three children that left them with only $57.78 a month for discretionary spending. The pair eventually lost office, the CFPB said.
“Vanderbilt knowingly traps people in risky loans in order to close a manufactured home sale,” CFPB Director Rohit Chopra said in a statement.
In a statement, Vanderbilt said its loan origination processes exceed legal requirements for evaluating borrowers’ ability to repay loans, and that the lawsuit will prevent some creditworthy borrowers from owning homes.
“The CFPB’s lawsuit is baseless and untrue, and is the latest example of politically motivated, regulatory overreach,” the lender said. “Vanderbilt Mortgage follows the law, and the facts bear it out.”
The CFPB has accused Vanderbilt of violating the federal Truth in Lending Act and is seeking civil penalties and damages for harmed borrowers.
She filed suit in federal court in Knoxville, Tennessee. Vanderbilt and Clayton are located in Maryville, Tennessee, a suburb of Knoxville.
Clayton is America’s largest builder of manufactured homes, including mobile homes, which are often bought by people who have low credit scores and incomes or live in rural areas.
It has been part of Omaha, Nebraska-based Berkshire since 2003, and in the first nine months of 2024 had revenue of $9.1 billion.
In 2015, the Seattle Times reported that Clayton was accused of predatory lending for forcing black, Hispanic and Native American borrowers into subprime loans they could not afford.
Buffett defended Clayton at the time, saying at Berkshire’s 2015 annual meeting of shareholders that he had “no excuses whatsoever regarding the terms of Clayton’s loan.”
The case is CFPB v. Vanderbilt Mortgage & Finance Inc, U.S. District Court, Eastern District of Tennessee, No. 25-00004.
