By Jonathan Stempel
(Reuters) -The U.S. Consumer Financial Protection Bureau on Monday sued a lender owned by Warren Buffett's Berkshire Hathaway (NYSE ), accusing it of pressuring borrowers into unaffordable mortgages to buy homes from Clayton Homes, the Berkshire manufactured housing business.
Vanderbilt Mortgage and Finance, a unit of Clayton, allegedly ignored “clear and obvious red flags” that borrowers were unable to pay their loans and failed to adequately evaluate borrowers' ability to pay other debts and keep food on the table.
The CFPB said this violated rules imposed after the 2008 global financial crisis that required mortgage lenders to verify borrowers' income and make good faith determinations about borrowers' ability to pay.
According to the regulator, many Vanderbilt borrowers incurred late fees and penalties when they fell behind on payments, and their homes were repossessed or they filed for bankruptcy after their loans went into default.
In one case, Vanderbilt approved a home loan for a couple with three children that left them only $57.78 a month for discretionary spending. The couple ultimately defaulted, the CFPB said.
“Vanderbilt knowingly traps people into risky loans to close the deal on a manufactured home,” CFPB Director Rohit Chopra said in a statement.
In a statement, Vanderbilt said its underwriting 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 false, 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 accused Vanderbilt of violating the federal Truth in Lending Act and is seeking civil penalties and restitution for harmed borrowers.
He filed his complaint in federal court in Knoxville, Tennessee. Vanderbilt and Clayton are based in Maryville, Tennessee, a suburb of Knoxville.
Clayton is the largest American builder of manufactured homes, including mobile homes, which are often purchased by people with low credit scores and incomes or who live in rural areas.
It has been part of Omaha, Nebraska-based Berkshire since 2003, and had revenue of $9.1 billion in the first nine months of 2024.
In 2015, Clayton was accused in Seattle Times reports of making predatory loans for steering black, Hispanic and Native American borrowers into subprime loans they could not repay.
Buffett defended Clayton at the time, saying at Berkshire's 2015 annual shareholder meeting that he was “not at all apologetic about the terms of Clayton's loans.”
The case is CFPB v. Vanderbilt Mortgage & Finance Inc, U.S. District Court, Eastern District of Tennessee, No. 25-00004.
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