The U.S. Consumer Financial Protection Bureau has filed a lawsuit against Vanderbilt Mortgage and Finance, a lender owned by Warren Buffett. The bureau accuses the company of pushing borrowers into unaffordable home loans.
The U.S. Consumer Financial Protection Bureau’s (CFPB) legal complaint further alleges that the lender’s actions violated federal regulations and potentially trapped borrowers in a debt cycle.
Vanderbilt Mortgage, which operates as a part of Clayton Homes, a major manufacturer of mobile homes, is accused of approving loans without adequately verifying their borrowers’ ability to repay, as required under regulations introduced after the housing crisis in 2008.
The CFPB also claims that Vanderbilt Mortgage disregarded red flags that borrowers were taking on more debt than they could ever reasonably handle.
The agency cited specific examples, including one instance where a couple with three children was approved for a loan that left them with only $57.78 a month for additional spending. Unsurprisingly, the couple eventually defaulted on the loan, and their home was repossessed, according to a report from Reuters.
“Vanderbilt manipulated lending standards to push mortgages on people looking to purchase homes that are built and sold by Clayton Homes, the largest manufactured home builder in the U.S., and other affiliated companies,” CFPB Director Rohit Chopra recently posted to X.
“For many borrowers, Vanderbilt charged additional fees and penalties when their loans became delinquent. Some borrowers eventually lost their homes,” Chopra added.
The regulator’s lawsuit is particularly significant because it targets a company with close ties to one of America’s most wealthy business figures, Warren Buffett. Buffett’s Berkshire Hathaway firm has owned Clayton Homes since 2003, making it the nation’s largest builder of manufactured homes. The company primarily serves low-income, rural, and underserved borrowers, per Reuters.
In response to the lawsuit, Vanderbilt Mortgage has vehemently denied the allegations, arguing that its processes meet all legal requirements.
“The CFPB’s lawsuit is unfounded and untrue, and is the latest example of politically motivated, regulatory overreach…Vanderbilt Mortgage follows the law, and the facts bear that out,” the lender said in a recently released statement, per Reuters.
The company added that the lawsuit would unfairly prevent creditworthy people from securing home loans in the future.
The CFPB, however, argues that Vanderbilt’s practices violated the Truth in Lending Act, which requires lenders to assess borrowers’ ability to repay loans before offering them credit. According to the lawsuit’s paperwork, the agency is seeking civil penalties and restitution for those impacted by the unfair loans.
The current lawsuit is not the first time Clayton Homes has faced scrutiny over its lending practices.
In 2015, the company was accused of targeting minority borrowers, mainly Black, Hispanic, and Native American communities, with subprime loans. The Center for Public Integrity published a report claiming that Clayton had pushed high-interest, unaffordable loans on these minority groups.
In response to the past accusations, Buffett defended Clayton’s practices, insisting that the company’s lending terms were fair. “I make no apologies whatsoever about Clayton’s lending terms,” Buffet said at a 2015 shareholder’s meeting.