The Consumer Financial Protection Bureau (CFPB) has sued Vanderbilt Mortgage & Finance, accusing the company of routinely approving manufactured-home loans for families who could not afford them.
The CFPB alleges that Vanderbilt Mortgage ignored signs that borrowers were financially incapable of paying back loans, leading to struggles with payments, extra fees, and in some cases, the loss of homes. The company is accused of manipulating loan standards and failing to verify borrowers' income and ability to repay, which is a requirement under federal law.
Vanderbilt Mortgage, a nonbank company based in Tennessee, originates loans for manufactured homes. Vanderbilt Mortgage is a unit of Clayton Homes, Inc., which is the largest manufactured home builder in the U.S. and a wholly owned subsidiary of Berkshire Hathaway, Inc., the multinational conglomerate based in Omaha, Nebraska.
The CFPB’s lawsuit seeks to stop Vanderbilt Mortgage's allegedly unfair practices and provide relief for the affected families.
The lawsuit charges that Vanderbilt Mortgage approved loans for borrowers with insufficient income or assets, and used artificially low estimates for living expenses, making it seem like they could afford the loans. The CFPB argues that these practices violated consumer protection laws and that Vanderbilt knowingly set families up for failure by approving loans they could not repay.
A Vanderbilt Mortgage spokesperson told ConsumerAffairs that the "lawsuit is unfounded and untrue, and is the latest example of politically motivated, regulatory overreach."
"The CFPB examined tens of thousands of Vanderbilt Mortgage loans and identified less than 0.8%, over a six-year period, that allegedly should not have been made," the spokesperson said. "Many of those loans have not been delinquent."
"Despite regularly blessing Vanderbilt Mortgage’s underwriting practices in the past, the CFPB is now demanding compliance with an unknown and unknowable new 'standard' not addressed in the law," the spokesperson said. "Far from protecting American consumers, the CFPB’s lawsuit will deprive credit worthy borrowers of owning a home."
About manufactured homes
- According to the U.S. Census Bureau, there are over 22 million manufactured homes in the U.S., accounting for around 6% of all housing units.
- Manufactured homes are particularly prevalent in certain states such as Texas, Florida, and California, where they make up a significant percentage of the housing stock.
- A large proportion of manufactured homes are located in manufactured home communities (mobile home parks), although some are located on privately owned land.
Solution to housing shortage?
Manufactured homes can provide a solution to the affordable housing crisis, offering homeownership opportunities for low-income families. In fact, they are one of the largest sources of affordable housing in the U.S.
On average, manufactured homes cost significantly less than traditional site-built homes, with the median price of a new manufactured home being about $87,000 (compared to $400,000+ for new site-built homes).
However, financing can be more difficult to obtain than for traditional homes, due to higher interest rates, shorter loan terms, and the fact that they may be considered personal property rather than real estate (if not permanently affixed to land).
- The Federal Housing Administration (FHA) offers financing for manufactured homes, but it has specific requirements regarding the home’s age, condition, and location on real property.
- Vanderbilt Mortgage, the target of today's CFPB suit, and other companies provide loans for purchasing manufactured homes, but these loans can often come with higher interest rates, making it more expensive for buyers to finance them.
Another challenge is that manufactured homes tend to depreciate in value over time, similar to cars, rather than appreciate like site-built homes.