CFPB Alleges Berkshire Hathaway Subsidiary Originated Unaffordable Housing Loans

A Berkshire Hathaway-owned lender knowingly originated unaffordable housing loans to low-income borrowers, causing missed payments and defaults, the Consumer Financial Protection Bureau alleged in a lawsuit filed Monday.

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Vanderbilt Mortgage & Finance originates mortgages for mobile homes built and sold by Vanderbilt-affiliated companies. Vanderbilt is a subsidiary of Clayton Homes, one of the nation’s largest manufacturers of mobile homes and a subsidiary of Warren Buffett’s Berkshire Hathaway.

When originating mortgages, Vanderbilt ignored “clear and obvious red flags” like lack of assets and outstanding debts that indicated certain borrowers would not be able to repay their loans according to the company’s terms, CFPB stated in its complaint filed in the U.S. District Court for the Eastern District of Tennessee.

Vanderbilt’s internal model for underwriting loans provided borrowers unrealistic expectations of monthly living expenses, the agency alleged. The company’s inaccurate model led Vanderbilt “to approve loans to borrowers who did not have enough income to cover their families’ likely living expenses after paying their often significant debt obligations each month,” CFPB claimed.

Maryville, Tennessee-based Vanderbilt told one couple with 33 outstanding debt obligations and two young children they would still have $65 in monthly income, even with a Vanderbilt mortgage, the complaint alleged. The couple fell behind on payments after eight months, CFPB added.

The CFPB also alleged Vanderbilt approved a mortgage to a woman with two dependents even after determining through its model that she had insufficient income to cover the loan. She missed her first payment just four months into repaying the mortgage, the board claimed.

“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. “The CFPB’s lawsuit seeks to not only protect homebuyers, but also honest lenders helping people to finance the purchase of an affordable home.”

After the 2008 housing crisis, Congress required mortgage lenders to verify borrowers’ income levels before issuing loans and must determine in good faith whether borrowers can repay. Though mobile homes are a less costly housing source for lower-income and older individuals, they often have higher interest rates and fewer opportunities for refinancing, CFPB said its research has found.

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Vanderbilt and Berkshire Hathaway did immediately respond Monday to requests for comment on the allegations.

The CFPB, which has been especially active under the Biden administration, could see significant changes in 2025. The agency has consistently drawn the ire of Republicans who say it has an anti-business agenda, and Elon Musk and other allies of President-elect Donald Trump have targeted the agency for possible elimination.

The Federal Reserve funds the CFPB so the agency is not subject to the Congressional appropriations process.

Sen. Tim Scott, R-South Carolina, has been especially critical of the agency’s enforcement actions, recently calling on Chopra to resign and cease all agency rulemaking for the duration of Biden’s term.

At a committee hearing in November, Scott—then the committee’s ranking Republican—said “the CFPB has operated in blind pursuit of additional power and has become the hallmark of government overreach—to the point where I am concerned the bureau is doing more harm to consumers than good.”