A federal regulator sued a mortgage finance agency owned by Warren Buffett’s Berkshire Hathaway conglomerate on Monday, claiming it made loans to patrons of manufactured properties that it knew they might not afford.
The civil swimsuit, filed in federal court docket within the Jap District of Tennessee by the Shopper Monetary Safety Bureau, mentioned Vanderbilt Mortgage and Finance ignored “clear and apparent” indicators that debtors wouldn’t be capable of repay the loans.
The buyer bureau mentioned Vanderbilt ignored that some debtors have been already falling behind on debt obligations when the loans have been issued.
“Vanderbilt knowingly traps folks in dangerous loans with a view to shut the deal on promoting a manufactured residence,” mentioned Rohit Chopra, the bureau’s director.
The lawsuit seeks to pressure Vanderbilt to vary its practices, present restitution to prospects and pay an unspecified civil penalty.
Vanderbilt is a subsidiary of Clayton Properties, the nation’s largest builder of manufactured properties, typically known as cellular or prefab homes. Clayton additionally owns twenty first Mortgage, which like Vanderbilt focuses on writing loans to patrons of manufactured properties. All three corporations are primarily based in Tennessee.
The swimsuit didn’t embody twenty first Mortgage. A spokeswoman for the regulator declined to remark.
A consultant for Vanderbilt and Clayton Properties didn’t reply to a request for remark.
Over time, Clayton Properties and its mortgage companies have drawn criticism for gross sales and lending practices.
Their major prospects are typically lower-income residents of rural communities. Manufactured housing is usually promoted as a pathway to homeownership for shoppers with restricted means.
However the shopper bureau mentioned its analysis discovered that such loans usually include higher-than-normal rates of interest, and are troublesome to refinance when charges decline.
The regulator mentioned a lot of Vanderbilt’s debtors weren’t capable of sustain with the month-to-month funds and have been charged late charges and penalties. In some circumstances, debtors confronted foreclosures and misplaced their properties.
In asserting the lawsuit, the company offered a hyperlink to complaints filed by Vanderbilt prospects.
The bureau has introduced a flurry of enforcement actions within the waning days of the Biden administration. Simply earlier than Christmas, it sued Rocket Mortgage, claiming the agency paid kickbacks to actual property brokers to steer debtors to it. Additionally in December, it sued three massive banks, accusing them of fraud for failing to cease scammers from swindling cash from prospects utilizing the money-transfer app Zelle.
Created within the aftermath of the monetary disaster, the bureau has drawn criticism for years from Republicans and the monetary companies business. The Republican-controlled Congress and Trump administration are more likely to attempt to rein within the shopper bureau, and the administration may transfer to dismiss a few of the last-minute lawsuits.
