Lender under investigation for alleged violations of consumer protection laws
A subsidiary of Warren Buffett’s Berkshire Hathaway Inc. is facing legal action over accusations of issuing home loans deemed unaffordable by a federal regulator.
According to a Bloomberg report, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Vanderbilt Mortgage & Finance Inc. in US District Court for the Eastern District of Tennessee on Monday. The CFPB alleges that the company “ignored clear and obvious red flags that certain consumers would not be able to repay their loans according to their terms,” according to the complaint.
“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 CFPB’s lawsuit seeks to not only protect homebuyers, but also honest lenders helping people to finance the purchase of an affordable home.”
The lawsuit claims Vanderbilt relied on unrealistic financial projections for borrowers, failing to account for essential living expenses like food and healthcare after mortgage payments. This approach reportedly led to financial hardship for many customers, including additional fees, defaults, and foreclosures.
Vanderbilt is part of Clayton Homes Inc., a single-family home builder acquired by Berkshire Hathaway in 2003.
According to The New York Times, Clayton Homes and its lending subsidiaries have faced criticism for their sales and lending practices over the years, though representatives for Vanderbilt and Clayton Homes did not respond to requests for comment on the lawsuit.
The lawsuit comes as the CFPB ramps up enforcement actions in the final days of the Biden administration. Recent actions have included lawsuits against Rocket Mortgage for alleged kickbacks to brokers and several major banks for failing to prevent Zelle-related fraud.
Established after the 2008 financial crisis, the CFPB has long been a target of criticism from Republicans and the financial industry. With a Republican-controlled Congress and a new administration likely to take over, the bureau could face attempts to curtail its power, and pending lawsuits could be reevaluated or dismissed.
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