CFPB Sues Vanderbilt for Risking Borrowers' Futures with Faulty Manufactured Home Loans.
The Consumer Financial Protection Bureau (CFPB) has initiated legal action against Vanderbilt Mortgage & Finance, accusing the company of setting families up for failure when they sought loans to purchase manufactured homes.
The CFPB claims that Vanderbilt's business practices disregarded evident indicators that the borrowers were unable to repay the loans. Consequently, numerous families have faced difficulties in making their payments and fulfilling essential living expenses. Additionally, Vanderbilt imposed extra fees and penalties on many borrowers whose loans became overdue, leading some to ultimately lose their homes.
The CFPB aims to halt Vanderbilt's unlawful activities and provide restitution for the affected homeowners. "Vanderbilt deliberately ensnares individuals in precarious loans to finalize the sale of manufactured homes," stated CFPB Director Rohit Chopra. "The lawsuit filed by the CFPB is intended not only to safeguard homebuyers but also to support reputable lenders who assist individuals in financing the acquisition of affordable housing." Vanderbilt Mortgage & Finance, Inc., located in Maryville, Tennessee, is a nonbank financing entity that provides loans for manufactured homes nationwide. It operates as a subsidiary of Clayton Homes, Inc., the largest manufacturer of manufactured homes in the United States, which is itself a wholly owned subsidiary of the multinational conglomerate Berkshire Hathaway, Inc., based in Omaha, Nebraska.
Vanderbilt facilitates mortgages for the acquisition of manufactured homes produced and sold by its affiliated companies. Manufactured homes, also known as mobile homes, serve as a crucial source of affordable housing, especially for millions of low-income and elderly Americans. For these homeowners, who primarily reside in rural regions, manufactured homes can bridge the gap created by the scarcity of affordable site-built housing. While manufactured homes may present a lower purchase price, research conducted by the CFPB indicates that loans for manufactured homes frequently carry higher interest rates and offer fewer refinancing options compared to conventional home mortgage loans.
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In light of significant issues in mortgage originations, particularly the systemic neglect of borrowers' income assessments during loan approvals, Congress enacted legislation in 2010 mandating that all residential mortgage lenders must document and verify borrowers' income prior to issuing a mortgage. Furthermore, lenders are required to conduct a good-faith and reasonable evaluation of the borrower's ability to repay the loan. These systemic oversights were directly linked to the foreclosure crisis of 2008, which led to over six million families losing their homes.
The Consumer Financial Protection Bureau (CFPB) contends that Vanderbilt failed to conduct reasonable and good-faith assessments of borrowers' repayment capabilities, as mandated by law. The lawsuit specifically claims that Vanderbilt: Altered lending criteria when borrowers lacked adequate income: During its underwriting process, Vanderbilt frequently overlooked evidence indicating that borrowers did not possess sufficient income or assets (aside from the value of their home) to manage their mortgage payments alongside recurring expenses and basic necessities such as food and healthcare. In some instances, Vanderbilt issued loans to borrowers who were already in financial distress, exacerbating their situations. For instance, Vanderbilt approved a loan for a family burdened with 33 debts in collection and two young children, leading to the borrowers falling behind on payments just eight months after securing the mortgage.
Produced unrealistic assessments of living expenses: Vanderbilt defended its conclusion that borrowers could afford the loans by employing artificially low estimates of living expenses, failing to account for higher costs in various geographic regions. Vanderbilt's estimated living expenses were approximately half of the average self-reported living expenses of other similar loan applicants. Consequently, these families were left with minimal or no financial cushion to address unforeseen expenses. For example, one family of five was left with only $57.78 in net income after Vanderbilt applied its estimated living expenses.
A year after signing the mortgage, that family experienced their first missed payment. Vanderbilt extended loans to borrowers it anticipated would struggle to repay them. In certain instances, the company disregarded its own guidelines by approving loans for individuals who, even based on Vanderbilt's overly optimistic projections, lacked sufficient income to manage both the mortgage and essential living costs.
For instance, a mortgage was granted to a single mother with two dependents despite an assessment indicating her income was inadequate. Subsequently, after just four months of residence, her loan was sent to collections due to a missed payment. The Consumer Financial Protection Bureau (CFPB) contends that Vanderbilt breached the Truth in Lending Act and Regulation Z. By issuing loans to borrowers without adequate income or assets beyond the property itself, Vanderbilt effectively set these families up for failure. Enforcement Action The CFPB, under the Consumer Financial Protection Act, possesses the authority to take action against entities that violate consumer financial regulations, including the enforcement of the Truth in Lending Act and Regulation Z. The lawsuit filed by the CFPB aims to halt the company's unlawful practices, provide restitution to affected consumers, and impose a civil monetary penalty that would contribute to the CFPB's victims relief fund.
For further details, please refer to today’s complaint. Consumer complaints against Vanderbilt can be reviewed. The CFPB offers resources for consumers regarding mortgages. Individuals can file complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372). Employees who suspect their employer has breached federal consumer financial protection laws are encouraged to report their knowledge to whistleblower@cfpb.gov. Additional information on reporting potential industry misconduct can be found on the CFPB’s website.
