By Jonathan Stempel
(Reuters) -The U.S. Consumer Financial Protection Bureau sued a lender owned by Warren Buffett's Berkshire Hathaway (NYSE:BRKa) on Monday, accusing it of pushing borrowers into unaffordable mortgages 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 failed to properly assess borrowers' ability to pay other debts and keep food on the table.
The CFPB said this violated rules imposed after the 2008 global financial crisis that required mortgage lenders to verify borrowers' incomes and make good-faith determinations about borrowers' ability to repay.
According to the regulator, many Vanderbilt 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 approved a home loan for a couple with three children that left them with just $57.78 a month for discretionary spending. 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.
In a statement, Vanderbilt said its underwriting processes exceed the legal requirements for assessing borrowers' ability to repay loans, and that the lawsuit will prevent some creditworthy borrowers from owning homes.
"The CFPB's lawsuit is unfounded and untrue, and is the latest example of politically motivated, regulatory overreach," the lender said. "Vanderbilt Mortgage follows the law, and the facts bear that out."
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.
In 2015, Clayton was accused in reports by the Seattle Times of predatory lending for driving 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.