The U.S. Consumer Financial Protection Bureau (CFPB) has sued Vanderbilt Mortgage and Finance, a unit of Warren Buffett’s Berkshire Hathaway. The lawsuit alleges that Vanderbilt ignored “clear and obvious red flags” that borrowers could not afford their loans. The CFPB claims that Vanderbilt’s lending practices put many families in a difficult financial situation.
They struggled to pay their bills and purchase basic necessities. In one instance, Vanderbilt approved a loan for a family that already had 33 debts in collection. This caused the family to fall 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,” CFPB Director Rohit Chopra said in a statement. Vanderbilt is a unit of Berkshire’s Clayton Homes, the nation’s largest builder of manufactured homes.
Cfpb accuses Vanderbilt of risky lending
Both companies are based in Tennessee. Vanderbilt has defended its practices, calling the lawsuit “unfounded and untrue.” The company stated, “For 50 years, Vanderbilt Mortgage has increased homeownership in the U.S. The CFPB’s lawsuit is the latest example of politically motivated, regulatory overreach.”
After the 2008 financial crisis, all lenders were required to verify borrowers’ incomes and determine their ability to repay a loan. The CFPB’s lawsuit alleges that Vanderbilt failed to make these verifications.
It also claims that the company sometimes manipulated its lending standards when borrowers had insufficient income or relied on unrealistic estimates of living expenses. Vanderbilt maintains that it adheres to all lending regulations, considering borrowers’ incomes and living expenses. The company highlighted that less than 0.8% of the tens of thousands of loans reviewed by the CFPB were found problematic.
Vanderbilt argued that the lawsuit aims to enforce “an unknown and unknowable new ‘standard’ not addressed in the law.” It warned that this might prevent creditworthy borrowers from owning a home. Berkshire Hathaway, headquartered in Omaha, Nebraska, owns a wide range of companies. These include manufacturers, major utilities, insurers like Geico, the BNSF railroad, and well-known retail brands such as Dairy Queen and Helzberg Diamonds.
