Warren Buffett defends lender accused of discrimination

by Ryan Smith01 Mar 2016
Berkshire Hathaway head Warren Buffett is on the defensive in the wake of accusations of predatory lending by the company’s mobile home unit.

Clayton Homes generates just 2% of Berkshire’s profit, according to a Reuters report. The company was given little notice until last year, when the Seattle Times published reports alleging that it steered minority borrowers into subprime loans they couldn’t afford and promoted a racist corporate culture.

Clayton Homes has “categorically and adamantly” denied that it discriminates against borrowers or employees. And Buffett defended the company in a Saturday letter to Berkshire shareholders.
“(Clayton Homes chief executive) Kevin Clayton has again delivered an industry-leading performance,” Buffett wrote.

According to Buffett, Clayton makes about 35% of all mortgage loans on manufactured homes. That means the company needs to lend carefully, he stated.

As a result of that diligence, Buffett wrote, just 2.64% of Clayton’s manufactured home loans defaulted last year, and more than 95% of borrowers were current on their payments at the year’s end.

But the allegations of discrimination don’t seem to be going away. In January, four Democrats on the House Financial Services Committee asked the Department of Justice and the Consumer Financial Protection Bureau to “pursue appropriate corrective action” against Clayton Homes, Reuters reported. No action has yet been announced.

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