A mortgage lender owned by Warren Buffet’s holding company, Berkshire Hathaway, has been sued by the Consumer Financial Protection Bureau (CFPB), alleging that the business pushed people into taking unaffordable loans.
“Vanderbilt charged many borrowers additional fees and penalties when their loans became delinquent, and some eventually lost their homes.”
Vanderbilt is a subsidiary of Clayton Homes, the largest builder of manufactured homes in the United States. Clayton is, in turn, a wholly owned subsidiary of Berkshire Hathaway Inc. Most homes financed by Vanderbilt are manufactured and sold by affiliated companies owned by Clayton.
In the complaint, the CFPB alleged that Vanderbilt “manipulated lending standards” when borrowers did not have enough income.
“Vanderbilt often disregarded evidence that borrowers did not have sufficient income or assets (other than the value of their home) to pay their mortgage and cover recurring obligations and basic living expenses, like food and health care,” the statement said.
“Sometimes, Vanderbilt originated loans for borrowers who were already struggling, making their financial situation worse.”
For instance, in one incident, the company allegedly approved a loan for a household with 33 debts in collection. Just eight months after getting the mortgage, the family fell behind in payments, court documents state.
Vanderbilt also made “artificially low estimates” of borrowers’ living expenses to justify they could pay back the loans, the CFPB claimed.
In one case, the company assumed “unreasonably low” monthly living expenses for a household of five members that only left them with $57.78 in net income, the lawsuit said. Vanderbilt went on to approve the loan, and the family missed the payment after a year, going into default, it said.
Furthermore, Vanderbilt approved loans to borrowers who the company had projected “could not pay” back the debts, the CFPB said.
For example, it approved a loan for a single mother with a residual income of negative $0.50 after applying the company’s living expense estimate, the lawsuit said. She soon failed to meet her obligations, and Vanderbilt sent the loan to collections.
The CFPB accused Vanderbilt of violating the Truth in Lending Act and Regulation Z, both of which require lenders to provide loans only after making a “reasonable and good faith determination” that the consumer is able to repay the loan.
“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” said CFPB director Rohit Chopra.
“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 company said its underwriting processes “exceed the legal requirements for assessing a borrower’s ability to repay loans,” and “goes further by taking the greater of the borrower’s actual reported expenses or an estimated living expense for the family size.”
Vanderbilt alleged that the CFPB only scrutinized a tiny portion of the loans made, which was “less than 0.8 percent, over a six-year period,” adding that many loans were not delinquent.
Under the DOGE Radar
Over the past months, the CFPB has taken action against multiple companies for allegedly engaging in practices that harm consumers or violate laws.“Rocket engaged in a kickback scheme that discouraged homebuyers from comparison shopping and getting the best deal,” Chopra said.
“At a time when homeownership feels out of reach for so many, companies should not illegally block competition in ways that drive up the cost of housing.”
It was found that the company did not ask these questions, reporting instead that applicants opted not to respond. The bank is alleged to have engaged in this practice for at least four years. The CFPB fined Bank of America $12 million.
Meanwhile, the agency has faced criticism from Elon Musk and Vivek Ramaswamy, who are set to lead the Department of Government Efficiency (DOGE) under the second Trump administration.
