The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit alleging that Vanderbilt Mortgage & Finance, a unit of Warren Buffett’s Berkshire Hathaway, “ignored clear and obvious red flags” when approving mortgages for the purchase of manufactured homes from another Berkshire company, Clayton Homes.
The CFPB claims that Vanderbilt’s actions resulted in many families being burdened with loans they couldn’t afford, pushing them into financial hardship.
The lawsuit revives concerns about potentially predatory lending practices within Berkshire’s extensive empire.
“Knowingly traps people in risky loans,” CFPB claims
According to the CFPB, Vanderbilt made lending decisions that led to families struggling to make payments and afford basic necessities.
The agency highlighted an instance in which Vanderbilt approved a loan for a family already burdened with 33 debts in collection.
That family quickly fell behind on payments just eight months after the loan was approved.
“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” said CFPB Director Rohit Chopra in a statement, underlining the agency’s concerns about the company’s motivations.
Vanderbilt and Clayton under scrutiny
Vanderbilt is a subsidiary of Berkshire’s Clayton Homes, which is the nation’s largest builder of manufactured homes.
A spokesperson for Vanderbilt told Associated Press that the company is currently reviewing the lawsuit but did not provide an immediate comment.
Similarly, Clayton also did not respond immediately to requests for comment. Both Vanderbilt and Clayton are based in Tennessee.
This recent legal action revisits criticisms raised a decade ago when Clayton faced accusations of predatory lending in news reports, accusations that Buffett previously defended, asserting that the company followed all state and federal laws.
Allegations of manipulated lending standards
In the aftermath of the 2008 financial crisis, triggered by failures in the mortgage market, all lenders were required to verify borrowers’ incomes and make a good-faith determination of their ability to repay a loan.
The CFPB alleges that Vanderbilt failed to adhere to these regulations, at times manipulating its lending standards when borrowers lacked sufficient income or relied on unrealistic estimates of living expenses.
The lawsuit contends that Vanderbilt prioritized closing deals over ensuring borrowers’ financial stability.
Berkshire’s vast portfolio under scrutiny
Berkshire Hathaway, headquartered in Omaha, Nebraska, owns a wide range of companies spanning various sectors, including other manufacturers, major utilities, insurers like Geico, the BNSF railroad, and well-known retail brands such as Dairy Queen and Helzberg Diamonds.
This lawsuit puts the spotlight on Berkshire’s operations and raises concerns about lending practices within its vast corporate network.
The post CFPB alleges Berkshire Hathaway unit ignored red flags in manufactured home loans appeared first on Invezz
