CFPB sues manufactured homes mortgage company for alleged violations

The Consumer Financial Protection Bureau (CFPB) took legal action against a mortgage company over alleged illegal practices related to financing manufactured homes.

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The CFPB sued Vanderbilt Mortgage & Finance for ignoring obvious red flags that the borrowers could not afford the loans. Then, Vanderbilt allegedly charged many borrowers additional fees and penalties when their loans became delinquent, the bureau said.

The CFPB is seeking to stop Vanderbilt’s alleged illegal practices and obtain relief for the harmed homeowners.

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

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Vanderbilt Mortgage & Finance is a nonbank financing company based in Maryville, Tenn., that originates loans for manufactured homes across the country. It is a unit of Clayton Homes, the largest manufactured home builder in the U.S. and a wholly owned subsidiary of Berkshire Hathaway.

The CFPB alleges that Vanderbilt failed to make reasonable, good-faith efforts to determine the ability of customers to repay loans, violating the Truth in Lending Act and Regulation Z. Specifically, the lawsuit alleges that Vanderbilt:

• Manipulated lending standards when borrowers did not make sufficient income: In its underwriting process, Vanderbilt often disregarded evidence that borrowers did not have sufficient income or assets to pay their mortgage and cover recurring obligations and basic living expenses, like food and health care. Sometimes, Vanderbilt originated loans for borrowers who were already struggling, making their financial situation worse.
• Fabricated unrealistic estimates of living expenses: Vanderbilt justified its determination that borrowers could pay the loans by using artificially low estimates of living expenses that made no adjustment for higher expenses in different geographic areas. Vanderbilt’s estimated living expenses were about half of the average of self-reported living expenses for other, similar, Vanderbilt loan applicants.
• Made loans to borrowers it projected could not pay: In some cases, Vanderbilt violated its own policy and made loans to borrowers who, even under the company’s overly optimistic estimates, did not have enough income to cover the mortgage and basic living expenses.

The CFPB’s lawsuit seeks to stop the company’s unlawful conduct, provide redress for harmed consumers, and impose a civil money penalty that would be paid into the CFPB’s victims relief fund.