The US Consumer Financial Protection Bureau (CFPB) has sued Vanderbilt Mortgage & Finance, accusing the company of engaging in lending practices that set families up for financial failure when purchasing manufactured homes.
The lawsuit alleges that Vanderbilt, a subsidiary of Berkshire Hathaway’s Clayton Homes, ignored clear indications that many borrowers could not afford their loans.
This resulted in severe financial hardships for families and, in some cases, the loss of homes.
Based in Maryville, Tennessee, Vanderbilt specialises in originating loans for manufactured homes, a vital source of affordable housing for millions of low-income and rural Americans.
However, the CFPB claims that Vanderbilt disregarded borrowers’ ability to repay loans and violated federal lending laws. It also imposed additional fees and penalties on delinquent accounts, exacerbating borrowers’ financial struggles.
The lawsuit also accuses Vanderbilt of multiple violations, including manipulating lending standards and fabricating unrealistic estimates of borrowers’ living expenses to justify loan approvals.
In some cases, Vanderbilt allegedly originated loans for borrowers with insufficient income or significant debts in collections.
The CFPB highlighted one case where Vanderbilt approved a loan for a family with 33 debts in collections, resulting in missed payments just eight months after the mortgage was issued.
In another instance, the company reportedly estimated unrealistically low living expenses, leaving a family of five with only $57.78 in monthly net income after accounting for mortgage payments.
Vanderbilt is also accused of approving loans for borrowers it projected could not meet mortgage obligations. One such case involved a single mother with two dependents, whose mortgage was sent to collections after she defaulted four months into the loan.
CFPB Director Rohit Chopra said: “Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home.
“The CFPB’s lawsuit seeks to not only protect homebuyers, but also honest lenders helping people to finance the purchase of an affordable home.”
The CFPB stated that Vanderbilt’s actions breached the Truth in Lending Act and Regulation Z by failing to make reasonable, good-faith determinations of borrowers’ ability to repay loans.
These requirements, introduced after the 2008 foreclosure crisis, mandate lenders to document and verify borrowers’ income and ensure loans are affordable.
The CFPB’s lawsuit seeks to halt Vanderbilt’s alleged unlawful practices, secure financial redress for affected borrowers, and impose civil monetary penalties to be directed into the CFPB’s victims’ relief fund.
