The Consumer Financial Protection Bureau filed a lawsuit against Vanderbilt Mortgage & Finance on Monday, alleging the Warren Buffett‘s Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK) subsidiary systematically approved unaffordable manufactured home loans that set borrowers up for failure.
What Happened: According to the CFPB complaint, Vanderbilt, a unit of Clayton Homes, allegedly manipulated lending standards and used artificially low living expense estimates to approve loans for borrowers who clearly couldn’t afford them.
In one case, the regulator cited a family of five was left with only $57.78 in monthly disposable income after mortgage payments.
“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” CFPB Director Rohit Chopra said in a statement.
The lawsuit, filed in federal court, claims Vanderbilt violated the Truth in Lending Act by disregarding evidence of insufficient income and approving loans for already struggling borrowers.
The CFPB cited an example where Vanderbilt approved a mortgage for a family with 33 debts in collection, who defaulted within eight months.
Why It Matters: Manufactured homes serve as crucial affordable housing, particularly for low-income and rural Americans. However, CFPB research shows these loans typically carry higher interest rates and limited refinancing options compared to traditional mortgages.
The regulator is seeking to halt Vanderbilt’s alleged illegal practices and secure relief for affected homeowners. Vanderbilt operates nationwide from its Maryville, Tennessee headquarters as part of Clayton Homes, the largest U.S. manufactured home builder and a wholly-owned subsidiary of Berkshire Hathaway.
The case highlights ongoing scrutiny of lending practices in the manufactured housing sector following Congress’s 2010 mandate requiring lenders to verify borrowers’ ability to repay loans – a response to the 2008 foreclosure crisis that saw over six million families lose their homes.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
