Berkshire unit is sued by US CFPB over risky home loans

By Jonathan Stempel

(Reuters) -The U.S. Consumer Financial Protection Bureau sued a unit of Warren Buffett's Berkshire Hathaway (NYSE:BRKa ) on Monday, accusing it of pushing borrowers into unaffordable loans to buy homes from Clayton Homes, Berkshire's manufactured housing business.

Vanderbilt Mortgage and Finance, a unit of Clayton, allegedly ignored "clear and obvious red flags" that borrowers could not afford their loans, and unreasonably underestimated their ability to pay other debts and keep food on the table.

The CFPB said many borrowers 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 instance, Vanderbilt allegedly approved a home loan for a couple with three children that left them with $57.78 a month for discretionary spending after paying expenses. The couple eventually defaulted, the CFPB said.

"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.

A spokeswoman for Vanderbilt and Clayton had no immediate comment.

The CFPB accused Vanderbilt of violating the federal Truth in Lending Act, and is seeking civil fines and restitution for harmed borrowers.

It filed its complaint in the Knoxville, Tennessee federal court. Vanderbilt and Clayton are based in Maryville, Tennessee, a Knoxville suburb.

Clayton is the largest U.S. builder of manufactured homes, including mobile homes, which are often bought by people who have low credit scores and incomes or live in rural areas.

It has been part of Omaha, Nebraska-based Berkshire since 2003, and had revenue of $9.1 billion in the first nine months of 2024.

Clayton was the subject of reports in the Seattle Times in 2015 alleging it drove Black, Hispanic and Native American borrowers into subprime loans they could not afford.



Buffett defended Clayton at the time, saying at Berkshire's 2015 annual shareholder meeting that he had "no apologies whatsoever about Clayton's lending terms."

The case is CFPB v Vanderbilt Mortgage & Finance Inc, U.S. District Court, Eastern District of Tennessee, No. 25-00004.

Source: Investing.com