Buffett’s Mobile-Home Unit Should Be Probed, Lawmakers Say

by 14 Jan 2016
Noah Buhayar

(Bloomberg) -- U.S. lawmakers called for federal investigations into Clayton Homes, the mobile-home business at Warren Buffett’s Berkshire Hathaway Inc., after the Seattle Times and BuzzFeed News wrote that the company targeted minority borrowers and charged them higher interest rates on average than whites.

Representative Maxine Waters, the top Democrat on the House Financial Services Committee, joined three colleagues -- Democratic congressmen Keith Ellison, Emanuel Cleaver and Michael Capuano -- in calling for the Department of Justice and Consumer Financial Protection Bureau to look into the company.

“The practices detailed in the Seattle Times and BuzzFeed News investigation present a disturbing business model that targets low- and moderate-income minority borrowers,” they wrote in a letter addressed to Attorney General Loretta Lynch and CFPB Director Richard Cordray. “The allegations raised in the news report are squarely within the agencies’ authority to investigate and pursue appropriate corrective action.”

Buffett didn’t respond to a request for comment on the letter. Clayton has disputed the publications’ findings, including their analysis of data obtained through the Home Mortgage Disclosure Act.

The company’s lending arms “are highly regulated by state and federal agencies, which closely monitor our treatment of borrowers,” Clayton said in a statement Wednesday. “The reporting is based on HMDA data, which does not include key factors used to underwrite and price loans, such as credit score, down payment and housing type.”

The Seattle Times and BuzzFeed reported the lawmakers’ letter Tuesday. For their Dec. 26 article, the publications crunched federal data to show a racial disparity in lending rates and documented sales practices that focused on minority communities. The news organizations also related incidents in which slurs were allegedly used in reference to employees and customers.

Published Allegations
It was the latest in a series of articles about Clayton, which has expanded under Berkshire’s ownership and is now the largest builder of mobile homes in the U.S. An earlier story accused the company of engaging in deceptive sales practices, trapping borrowers in residences that are difficult to resell. Customers said collection agents working for the manufacturer told them to cut back on food and medical care to make house payments, according to that report.

Clayton has called the news accounts misleading. In a statement after the Dec. 26 article was published, the company said race and ethnicity don’t factor into how it prices loans, that it doesn’t target minority communities and that it doesn’t tolerate discrimination against employees.

Wider Range
The manufacturer also said that it offers mortgages to borrowers with a wider range of credit scores than do competitors, which could result in a disproportionate share of its loans being made to minority borrowers. The company had previously said that most customers are satisfied with their homes and mortgages.

At Berkshire’s annual meeting in May, Buffett said he made “no apologies” for the business.

Buffett, 85, became one of the world’s richest people by building Omaha, Nebraska-based Berkshire over the past five decades into a sprawling conglomerate. Its operations now include insurers, manufacturers, retailers, electric utilities and one of the largest railroads in the U.S. The billionaire has cultivated a folksy image and speaks frequently about honesty and ethics in business.

Waters, a California Democrat and former chair of the Congressional Black Caucus, opposed legislation last year that would have eliminated consumer protections on some mobile-home loans. She reiterated that position in a statement Tuesday.

Sam Gilford, a spokesman for the CFPB, declined last month to comment on whether the Clayton or its lending arms, Vanderbilt Mortgage & Finance and 21st Mortgage, are being investigated. He said at the time that “the allegations of discrimination and predatory practices raised by the reporting are obviously very concerning to the bureau.”
 

COMMENTS

  • by SBHarkness | 1/14/2016 2:52:50 PM

    Why is there no mention of FICO scores? Of course someone with lower FICO scores is going to be charged a higher interest rate than someone with higher FICO scores. This is all about risk management and most likely nothing to do with discrimination! People with higher FICO scores earned those scores by paying their bills on time, and four other categories. Those with lower FICO scores also earned those scores by not paying as agreed. This is a favorite tactic of the likes of Maxine Waters and her ilk. They look at things in black & white. If more black people have bad credit than white people then they (as a group) are going to be charged a higher interest rate. However, if Maxine Waters looked at FICO scores and then looked to see what interest rate was charged then checked the box that discloses race...I am sure she would find that minority applicants with the higher FICO scores were given the benefit of the same lower rates as others with the same FICO score, white, tan, or polka dotted skin.....it doesn't matter when it comes to assessing risk.

  • by Mitchelle | 5/16/2016 7:57:29 AM

    End your financial worries now: I can smile that God-fearing man, who had secured $ 76,000 Usd and two of my colleagues have also received mortgages from this man, without any difficulty. I advise you not to choose the wrong person, you will definitely apply for a cash mortgage for your project and each other. I wrote this post, because Mr. Favour Henry, made me feel blessed their mortgages. It's through a friend that I met this honest and generous God fearing man who helped me get this fund to pay for the mortgage of your life, you need financial help, you're stuck, do not have access to bank credit, or not in favor of the bank to finance your construction, real estate development, the development of your business your own business, you must have seen and earn money, bad credit or need money to pay bills or debts. Therefore, we recommend that you go there, please contact and meet with you for the services you ask for it. Contact address: MRFAVOURINVESTMENT@USA.COM

  • by babara johnson | 7/4/2016 6:41:56 PM

    DO YOU NEED A LOAN?

    Good day ladies and gentle men am Mrs Barbara Johnson a God fearing and honest mortgage lender who can change your life from bad to Good i want you to understand the fact that i give my mortgages out in a low interest rate of 3%. Bad credit acceptable,The Terms and Conditions are very simple and considerate. You will never regret in this mortgage transaction because i will make you smile through out this transaction, because you where not born to be a loser my terms and conditions are very simple what are you waiting for asap why don’t you try Mrs Barbara Johnson mortgage company and be free from debts, Any interested clients should contact me Asap via Email: (helpcareserviceportal@gmail.com ) for further proceeds. Please fill the below application form and get back if interested and you will be glad of knowing a mortgage lender like Mr Evans Johnson

    BORROWER’S DATA

    1. Full Names:............................
    2. Contact Address:.......................
    3. Country:..............................
    4. Loan Amount Needed:....................
    5. Duration of the Loan...................
    6. Direct Telephone Number:.................
    7. Monthly Income:...........................

    Contact email: helpcareserviceportal@gmail.com

    I will be looking forward to hear from you so as to proceed.

    Kind Regards

Poll

Is TILA-RESPA a good or bad thing long term?