FOR IMMEDIATE RELEASE:
January 6, 2025
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CFPB Sues Vanderbilt for Setting Borrowers Up to Fail in Manufactured Home Loans
Berkshire Hathaway-owned company pushes people into unaffordable loans to purchase Clayton Homes
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) sued Vanderbilt Mortgage & Finance for setting families up to fail when they borrowed money to buy a manufactured home. The CFPB alleges that Vanderbilt’s business model ignored clear and obvious red flags that the borrowers could not afford the loans. As a result, many families found themselves struggling to make payments and meet basic life necessities. Vanderbilt charged many borrowers additional fees and penalties when their loans became delinquent, and some eventually lost their homes. The CFPB is seeking to stop Vanderbilt’s illegal practices and obtain relief for the harmed homeowners.
“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.”
Vanderbilt Mortgage & Finance, Inc. is a nonbank financing company based in Maryville, Tennessee that originates loans for manufactured homes across the country. Vanderbilt is a unit of Clayton Homes, Inc., which is the largest manufactured home builder in the U.S. and a wholly owned subsidiary of Berkshire Hathaway, Inc., the multinational conglomerate based in Omaha, Nebraska.
Vanderbilt originates mortgages for the purchase of manufactured homes that are built and sold by Vanderbilt-affiliated companies. Manufactured homes, or mobile homes, are a vital source of affordable housing, particularly for millions of low-income Americans and for older Americans. For these homeowners, who predominately live in rural areas, manufactured homes can fill the gap left by the lack of affordable site-built homes. Although manufactured homes may be more affordable to purchase, CFPB research has shown that manufactured home loans often come coupled with higher interest rates and limited opportunity to refinance compared to traditional home mortgage loans.
In response to widespread problems in mortgage originations, including systemic failures to consider borrowers’ income when making loans, Congress in 2010 required that all residential mortgage lenders document and verify borrowers’ income before making a mortgage, and that mortgages only be made after the lender has made a good-faith and reasonable determination that the borrower can repay the loan. Those systemic failures contributed directly to the 2008 foreclosure crisis, which resulted in more than six million families losing their homes.
The CFPB alleges that Vanderbilt failed to make reasonable, good-faith determinations of borrowers’ ability to repay loans, as legally required. Specifically, the lawsuit alleges Vanderbilt:
Manipulated lending standards when borrowers did not make sufficient income: In its underwriting process, 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. Sometimes, Vanderbilt originated loans for borrowers who were already struggling, making their financial situation worse. For example, Vanderbilt approved a loan for a family with 33 debts in collection and two young children. The borrowers fell behind only eight months after getting the mortgage.
Fabricated unrealistic estimates of living expenses: Vanderbilt justified its determination that borrowers could pay the loans by using artificially low estimates of living expenses that made no adjustment for higher expenses in different geographic areas. Vanderbilt’s estimated living expenses were about half of the average of self-reported living expenses for other, similar, Vanderbilt loan applicants. These families were left with little or no buffer to cover unexpected expenses. For example, Vanderbilt left one family of five with only $57.78 in net income after Vanderbilt applied its estimate of living expenses. That family first missed a payment only a year after signing the mortgage.
Made loans to borrowers it projected could not pay: In some cases, Vanderbilt violated its own policy and made loans to borrowers who, even under the company’s overly optimistic estimates, did not have enough income to cover the mortgage and basic living expenses. For example, Vanderbilt approved a mortgage for a single mother with two dependents after estimating she had insufficient income, and then sent her loan to collections when she missed a mortgage payment after only four months in the home.