CFPB files lawsuit against Berkshire's Vanderbilt over unaffordable home loans

Investing.com -- The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Vanderbilt Mortgage & Finance, a nonbank financing company based in Tennessee. The suit alleges that the company, a subsidiary of Clayton Homes, Inc. and owned by Berkshire Hathaway (NYSE:BRKa ), Inc., has been setting up families to fail by pushing them into unaffordable loans for the purchase of manufactured homes.

According to the CFPB, Vanderbilt's business model overlooks clear signs that borrowers might not be able to afford the loans. This has led to many families struggling to make payments and meet basic life needs. The company also charged additional fees and penalties when loans became overdue, with some borrowers eventually losing their homes.

"Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home," said CFPB Director Rohit Chopra. The lawsuit aims to halt Vanderbilt's alleged illegal practices and provide relief for the harmed homeowners.

Manufactured homes, also known as mobile homes, are a crucial source of affordable housing, particularly for millions of low-income and older Americans, predominantly in rural areas. However, CFPB research indicates that loans for these homes often come with higher interest rates and limited refinancing opportunities compared to traditional home mortgage loans.

The lawsuit alleges that Vanderbilt failed to make reasonable, good-faith determinations of borrowers' ability to repay loans, as legally required. This includes accusations of manipulating lending standards when borrowers did not have sufficient income, fabricating unrealistic estimates of living expenses, and making loans to borrowers it projected could not pay.

The CFPB claims that Vanderbilt violated the Truth in Lending Act and Regulation Z by originating loans to borrowers who lacked sufficient income or assets to make payments on the loan, thereby setting these families up for failure.

The CFPB, under the Consumer Financial Protection Act, has the power to take action against institutions violating consumer financial laws. The lawsuit seeks to stop the company's alleged unlawful conduct, provide redress for harmed consumers, and impose a civil money penalty, which would be paid into the CFPB's victims relief fund.

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Source: Investing.com