CFPB Sues Vanderbilt Mortgage, Alleging It ‘Traps People in Risky Loans’

The Consumer Financial Protection Bureau sued nonbank financing company Vanderbilt Mortgage & Finance Monday (Jan. 6), saying the company made loans to consumers despite evidence that they could not afford those loans.

Vanderbilt Mortgage is a unit of manufactured home builder Clayton Homes, which is a wholly owned subsidiary of Berkshire Hathaway, the CFPB said in a Monday (Jan. 6) press release. The nonbank financing company originates loans for manufactured homes across the United States.

“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” CFPB Director Rohit Chopra said in the release. “The CFPB’s lawsuit seeks to not only protect homebuyers, but also honest lenders helping people to finance the purchase of an affordable home.”

Reached by PYMNTS, Vanderbilt Mortgage said in an emailed statement that the CFPB’s lawsuit is “unfounded and untrue” and an example of “politically motivated, regulatory overreach.”

“Vanderbilt Mortgage’s underwriting processes exceed the legal requirements for assessing a borrower’s ability to repay loans by considering both monthly debt-to-income ratio and residual income, while the law only requires the use of one or the other,” the statement said. “Vanderbilt Mortgage goes further by taking the greater of the borrower’s actual reported expenses or an estimated living expense for the family size, similar to that used by the Federal VA loan program.”

The statement added that the CFPB identified less than 0.8% of the company’s loans it examined as ones that allegedly should not have been made. Many of those loans have not been delinquent, the statement said.

“Despite regularly blessing Vanderbilt Mortgage’s underwriting practices in the past, the CFPB is now demanding compliance with an unknown and unknowable new ‘standard’ not addressed in the law,” the statement said. “Far from protecting American consumers, the CFPB’s lawsuit will deprive credit-worthy borrowers of owning a home.”

The CFPB’s complaint alleged that the company violated the Truth in Lending Act and Regulation Z by ignoring evidence that borrowers did not have sufficient income or assets to pay their mortgage and living expenses, used artificially low estimates of living expenses to determine that borrowers could pay the loans, and, in some cases, made loans to borrowers it determined could not cover the mortgage and basic living expenses, per the agency’s press release.

The agency’s lawsuit seeks a stop to Vanderbilt Mortgage’s alleged unlawful conduct, redress for harmed consumers and a civil money penalty that would be paid into the CFPB’s victims relief fund, according to the release.

The CFPB found in a 2021 report that manufactured housing is an important option for affordable housing and makes up 13% of the housing stock in small towns and rural areas.

The agency also found that while this option offers low acquisition costs, it can also be a risky avenue for home ownership because it often includes higher interest rates and limited opportunity to refinance.

In another move impacting lenders, the CFPB said Thursday (Jan. 2) that it is working to prevent unlawful debt collection targeting consumers at their workplaces.

The regulator said it continues to crack down on companies that harass consumers and that it encourages federal and state law enforcement officials to be on the lookout for companies that contact people at work to coerce them to pay debts.