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 may not afford.
The civil swimsuit, filed in federal court docket within the Japanese District of Tennessee by the Client Monetary Safety Bureau, mentioned Vanderbilt Mortgage and Finance ignored “clear and apparent” indicators that debtors wouldn’t be capable to repay the loans.
The buyer bureau mentioned Vanderbilt missed that some debtors have been already falling behind on debt obligations when the loans have been issued.
“Vanderbilt knowingly traps individuals in dangerous loans with the intention to shut the deal on promoting a manufactured house,” mentioned Rohit Chopra, the bureau’s director.
The lawsuit seeks to drive Vanderbilt to alter its practices, present restitution to clients and pay an unspecified civil penalty.
Vanderbilt is a subsidiary of Clayton Properties, the nation’s largest builder of manufactured properties, generally known as cell or prefab homes. Clayton additionally owns twenty first Mortgage, which like Vanderbilt makes a speciality of writing loans to patrons of manufactured properties. All three corporations are based mostly 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 foremost clients are typically lower-income residents of rural communities. Manufactured housing is commonly promoted as a pathway to homeownership for customers 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 lots 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 instances, debtors confronted foreclosures and misplaced their properties.
In saying the lawsuit, the company supplied a hyperlink to complaints filed by Vanderbilt clients.
The bureau has introduced a flurry of enforcement actions within the waning days of the Biden administration. Simply earlier than Christmas, it sued Rocket Properties, claiming the agency paid kickbacks to actual property brokers to steer debtors to Rocket Mortgage, an affiliated firm. Additionally in December, it sued three huge banks, accusing them of fraud for failing to cease scammers from swindling cash from clients 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 trade. The Republican-controlled Congress and Trump administration are doubtless to attempt to rein within the shopper bureau, and the administration may transfer to dismiss among the last-minute lawsuits.