Federal regulators on Monday sued a mortgage finance company owned by Warren Buffett's Berkshire Hathaway conglomerate, accusing it of making loans to buyers of existing homes it knew they couldn't afford. .
The civil suit, filed by the Consumer Financial Protection Bureau in federal court in the Eastern District of Tennessee, said Vanderbilt Mortgage & Finance ignored “obvious” signs that the borrower would not be able to repay the loan. .
The Consumer Affairs Bureau said Vanderbilt overlooked the fact that some of the borrowers were already in default at the time the loans were made.
“The city of Vanderbilt knowingly puts people into risky loans in order to close contracts on the sale of their homes,” said Rohit Chopra, the agency's director.
The lawsuit seeks to force Vanderbilt to change its practices, compensate customers and pay an unspecified civil penalty.
Vanderbilt is a subsidiary of Clayton Homes, the nation's largest builder of mobile or manufactured homes, also known as manufactured homes. Mr. Clayton, like Mr. Vanderbilt, also owns 21st Mortgage, which specializes in lending to homebuyers. All three companies are based in Tennessee.
The lawsuit did not include the 21st mortgage. A spokeswoman for the regulator declined to comment.
“The CFPB's lawsuit is baseless, false and the latest example of politically motivated regulatory overreach,” Vanderbilt spokeswoman Christina Honkonen said in a statement. Regulators reviewed tens of thousands of Vanderbilt loans and “identified less than 0.8%” of potentially problematic loans, the statement said.
Clayton Homes and its mortgage company have long drawn criticism for its sales and financing practices.
Their primary customers tend to be low-income people in rural areas. Housing is often promoted as a path to homeownership for consumers with limited means.
But the Consumer Affairs Bureau said its research found that such loans often come with higher-than-normal interest rates, making it difficult to refinance when interest rates fall.
Regulators said many of Vanderbilt's borrowers were unable to keep up with their monthly payments and were charged late fees and penalties. In some cases, renters lost their homes to foreclosure.
In announcing the lawsuit, the agency provided links to complaints filed by Vanderbilt customers.
The department has taken a flurry of enforcement actions during the waning days of the Biden administration. Just before Christmas, the company sued Rocket Homes for allegedly paying kickbacks to real estate brokers to steer borrowers to its affiliate Rocket Mortgage. In December, the bank filed fraud charges against three major banks for failing to prevent fraudsters from using the money transfer app Zelle to defraud customers.
The agency, created in the aftermath of the financial crisis, has long drawn criticism from Republicans and the financial services industry. The Republican-controlled Congress and the Trump administration are likely to try to rein in the Consumer Affairs Bureau, and the administration could move to dismiss some last-minute lawsuits.
