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A mortgage lender that focuses on offering financing for manufactured houses has landed in scorching water with federal regulators, who declare the corporate “saddled borrowers in the greatest need with mortgages that they couldn’t reasonably afford to repay.”
Maryville, Tennessee-based Vanderbilt Mortgage and Finance — which additionally does enterprise as Silverton Mortgage — is accused of violating the Reality in Lending Act and Regulation Z. Regulation Z requires that every one mortgage lenders doc and confirm debtors’ revenue to find out whether or not they have the flexibility to repay the mortgage they’re making use of for.
Vanderbilt, which largely offers financing for houses constructed by its dad or mum firm, Clayton Properties Inc., “ignored clear and obvious red flags that certain consumers would not be able to repay their loans according to their terms,” the Client Monetary Safety Bureau alleged in a Jan. 6 grievance.
In an announcement supplied to Inman, Vanderbilt characterised the CFPB’s allegations as “unfounded and untrue, and … the latest example of politically motivated, regulatory overreach.”
Vanderbilt mentioned the CFPB examined “tens of thousands” of loans “and identified less than 0.8 percent, over a six-year period, that allegedly should not have been made.” Vanderbilt “follows the law, and the facts bear that out,” the corporate mentioned.
On its web site, Clayton Properties says that it’s “Opening doors to a better life,” by providing “attainable, modern homes for sale.” Clayton Properties claims it and subsidiaries together with Schult Properties, Crest Properties, Karsten Properties, Golden West Properties and SEhomes constructed greater than 52,000 manufactured and site-built modular houses throughout the nation in 2023.
In its grievance, the CFPB alleged that Vanderbilt used “implausible estimates” of month-to-month bills that underestimated how a lot debtors would wish to pay their mortgage and nonetheless “keep food on the table” and meet different dwelling bills.
In some circumstances, the lender violated its personal coverage and made loans to debtors who lacked the revenue to cowl their mortgage and fundamental dwelling bills at the same time as calculated by Vanderbilt’s “artificially low estimates” of dwelling bills, which weren’t adjusted for the upper value of dwelling in several elements of the nation, the federal government alleged.
Rohit Chopra
“Vanderbilt knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” CFPB Director Rohit Chopra mentioned in a assertion. “The CFPB’s lawsuit seeks to not only protect homebuyers, but also honest lenders helping people to finance the purchase of an affordable home.”
A nonbank lender, Vanderbilt sponsors 287 mortgage mortgage originators understanding of 35 department workplaces in Alabama, Arizona, Florida, Georgia, Indiana, Kentucky, Missouri, North Carolina, Ohio, South Carolina and Tennessee, in keeping with data maintained by the Nationwide Multistate Licensing System (NMLS).
The CFPB alleges that Vanderbilt makes use of a “residual income model” to find out if debtors have the flexibility to repay the mortgage they’re making use of for. The mannequin subtracts candidates’ self-reported month-to-month prices for meals, healthcare, gasoline and utility payments from their month-to-month revenue to see if they’ll additionally make their month-to-month mortgage funds.
In circumstances the place debtors self-report $0 in dwelling bills, “Vanderbilt substitutes its own, proprietary living-expense estimate” based mostly on household measurement “that are unreasonable for a single borrower and increasingly unreasonable as borrower’s family size grows,” prosecutors alleged.
In a single instance cited within the CFPB’s grievance, Vanderbilt estimated a household of 5 that already had seven money owed in assortment can be left with solely $57.78 in internet revenue a month in the event that they took out a mortgage, however permitted a mortgage that turned delinquent after a yr.
In one other case, Vanderbilt permitted a mortgage for a single mom with two dependents and 9 money owed in assortment though the lender calculated it might go away her with no residual revenue. The mortgage was despatched to collections when she missed a mortgage cost after solely 4 months within the residence, the CFPB alleged.
The CFPB additionally pointed to greater than 200 complaints it has acquired from customers about Vanderbilt’s practices.
Vanderbilt mentioned its underwriting processes “exceed the legal requirements for assessing a borrower’s ability to repay loans by considering both monthly debt-to-income ratio and residual income, while the law only requires the use of one or the other.”
The corporate says it goes additional than the legislation requires, “by taking the greater of the borrower’s actual reported expenses or an estimated living expense for the family size, similar to that used by the Federal VA loan program.”
“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 corporate mentioned. “Far from protecting American consumers, the CFPB’s lawsuit will deprive credit worthy borrowers of owning a home.”
Editor’s be aware: This story has been up to date to incorporate an announcement by Vanderbilt Mortgage and Finance.
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