CFPB Charges Mortgage Lender for Unaffordable Loan Practices

On January 6, 2025, the CFPB filed a lawsuit against a non-bank manufactured home financing company for violations of the Truth in Lending Act and Regulation Z. The lawsuit alleges that the mortgage lender engaged in predatory lending practices by providing manufactured home loans to borrowers it knew could not afford them.

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According to the CFPB, the mortgage lender allegedly ignored “clear and obvious red flags” indicating the borrowers’ inability to afford the loans. This resulted in many families struggling to make payments, afford basic necessities, and facing fees, penalties, and even foreclosure. The Bureau alleges the lender failed to make reasonable, good-faith determinations of borrower’s ability to repay, as required by the Truth in Lending Act (TILA) and Regulation Z.

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The CFPB’s lawsuit specifically claims that the lender:

• Manipulated lending standards. The mortgage lender disregarded clear and obvious evidence that borrowers lacked sufficient income or assets to meet their mortgage obligations and basic living expenses. On some occasions, borrowers who were already struggling financially were approved for loans, worsening their financial situation.
• Fabricated unrealistic estimates of living expenses. The company justified its determination that borrowers could afford loans by using artificially low estimates of living expenses. The estimated living expenses were about half of the average of self-reported living expenses for other, similar loan applicants.
• Made loans to borrowers projected to be unable to pay. The lender approved loans despite the company’s own internal estimates indicating the borrower’s inability to pay.

Putting It Into Practice: As Chopra’s term wraps out, the Bureau is on a frantic mission to file as many lawsuits as it can for its ongoing enforcement matters. How that will impact the incoming administration remains to be seen. But it seems likely that a new CFPB Director will take a hard look at much of the active litigation and re-evaluate the Bureau’s position.

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