The United States Consumer Financial Protection Bureau (CFPB) sued a lender owned by Warren Buffett’s Berkshire Hathaway, accusing it of pushing borrowers to take out unaffordable mortgages to purchase homes from Clayton Homes, Berkshire’s manufactured housing business.
Vanderbilt Mortgage and Finance, a unit of Clayton, according to the regulator, ignored clear and obvious red flags that borrowers could not afford their loans. Also, in this context, a claim was made that the mentioned unit failed to properly assess the borrowers’ ability to pay other debts and keep food on the table.
The CFPB stated that the mentioned actions of Vanderbilt Mortgage and Finance are a violation of the rules imposed after the global financial crisis of 2008, requiring mortgage lenders to verify borrowers’ incomes and make good-faith decisions about their solvency.
According to the regulator, many borrowers of the mentioned unit of Clayton incurred late fees and penalties when they fell behind on payments, and had their homes repossessed or filed for bankruptcy after their loans went into default.
In one case, Vanderbilt Mortgage and Finance approved a home loan for a couple with three children, leaving them with just $57.78 per month in discretionary spending. As a result, this couple defaulted.
CFPB Director Rohit Chopra said that Vanderbilt Mortgage and Finance knowingly traps people in risky loans to close the deal on selling a manufactured home.
In a statement from Vanderbilt Mortgage and Finance, it was noted that the underwriting processes exceed the legal requirements for assessing borrowers’ ability to repay loans. Also, in this case, it was highlighted separately that the lawsuit would not allow some creditworthy borrowers to become owners of homes.
Moreover, Vanderbilt Mortgage and Finance said the CFPB’s lawsuit is unfounded and untrue and is the latest example of a politically motivated, regulatory overreach.
As we have reported earlier, CFPB Fines Bank of America.
