A federal regulator sued a mortgage finance agency owned by Warren Buffett’s Berkshire Hathaway conglomerate on Monday, claiming it made loans to patrons of manufactured houses that it knew they might not afford.
The civil go well with, filed in federal court docket within the Jap District of Tennessee by the Client Monetary Safety Bureau, mentioned Vanderbilt Mortgage and Finance ignored “clear and apparent” indicators that debtors wouldn’t have the ability to repay the loans.
The buyer bureau mentioned Vanderbilt missed that some debtors have been already falling behind on debt obligations when the loans have been issued.
“Vanderbilt knowingly traps individuals in dangerous loans with a purpose to shut the deal on promoting a manufactured residence,” mentioned Rohit Chopra, the bureau’s director.
The lawsuit seeks to power Vanderbilt to vary its practices, present restitution to clients and pay an unspecified civil penalty.
Vanderbilt is a subsidiary of Clayton Properties, the nation’s largest builder of manufactured houses, typically referred to as cell or prefab homes. Clayton additionally owns twenty first Mortgage, which like Vanderbilt focuses on writing loans to patrons of manufactured houses. All three corporations are primarily based in Tennessee.
The go well with didn’t embrace twenty first Mortgage. A spokeswoman for the regulator declined to remark.
Christina Honkonen, a spokeswoman for Vanderbilt, mentioned in an announcement: “The C.F.P.B.’s lawsuit is unfounded and unfaithful, and is the most recent instance of politically motivated, regulatory overreach.” Regulators examined tens of hundreds of Vanderbilt loans, the assertion added, and “recognized lower than 0.8 %” which will have had points.
Over time, Clayton Properties and its mortgage companies have drawn criticism for gross sales and lending practices.
Their predominant clients are typically lower-income residents of rural communities. Manufactured housing is usually promoted as a pathway to homeownership for shoppers with restricted means.
However the client bureau mentioned its analysis discovered that such loans usually include higher-than-normal rates of interest, and are troublesome to refinance when charges decline.
The regulator mentioned lots of Vanderbilt’s debtors weren’t capable of sustain with the month-to-month funds and have been charged late charges and penalties. In some circumstances, debtors confronted foreclosures and misplaced their houses.
In asserting the lawsuit, the company offered a hyperlink to complaints filed by Vanderbilt clients.
The bureau has introduced a flurry of enforcement actions within the waning days of the Biden administration. Simply earlier than Christmas, it sued Rocket Properties, claiming the agency paid kickbacks to actual property brokers to steer debtors to Rocket Mortgage, an affiliated firm. Additionally in December, it sued three huge banks, accusing them of fraud for failing to cease scammers from swindling cash from clients utilizing the money-transfer app Zelle.
Created within the aftermath of the monetary disaster, the bureau has drawn criticism for years from Republicans and the monetary companies business. The Republican-controlled Congress and Trump administration are prone to attempt to rein within the client bureau, and the administration may transfer to dismiss among the last-minute lawsuits.
