The US government is now suing a Maryland-based mortgage lender for allegedly engaging in predatory lending practices and giving loans to borrowers who could not afford the payments.
The Consumer Financial Protection Bureau (CFPB) filed the civil lawsuit in the US District Court in the Eastern District of Tennessee on Monday. The agency accused Vanderbilt Mortgage and Finance Inc. of ignoring "obvious red flags" and providing borrowers with unaffordable loans. This led many of its borrowers to fall behind on payments and have their homes repossessed, according to CNN.
Vanderbilt Mortgage operates as a subsidiary of Clayton Homes, the largest manufacturer of manufactured homes in the US. It is wholly owned by Berkshire Hathaway—a company owned by Warren Buffet.
What Was Vanderbilt Accused Of?
The CFPB claimed Vanderbilt violated the federal Truth in Lending Act by underestimating borrowers' ability to pay their loans. In one instance cited in the lawsuit, Vanderbilt approved a home loan for a family of five. The loan left them with only $57.78 a month for discretionary spending, and the family eventually defaulted on their mortgage.
In another case, Vanderbilt allegedly approved a mortgage for a family that already had 33 debts in collection. The family fell behind in mortgage payments eight months later, according to WBIR.
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In a third case, CFPB claimed the firm gave a single mother with two dependents a loan even when she had a residual income of $-0.50 and nine debts in collection, WATE reported.
"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's Response
The firm itself has yet to respond to the accusations. However, a strategic firm representing Vanderbilt said the lawsuit was "unfounded and untrue" and called the allegations an "example of politically motivated, regulatory overreach."
Clayton, the subsidiary Vanderbilt is under, was previously accused of providing Black, Hispanic, and Native American borrowers with subprime loans despite not being able to afford them. The allegation, made in a 2015 report published in The Seattle Times, also claimed Clayton relied on predatory practices, including giving borrowers interest rates exceeding 15%.
