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A mortgage company that specializes in lending to homes faces a run-in with federal regulators, who say the company “has mortgages that cannot reasonably be repaid to the most needy borrowers.”
Maryville, Tenn.-based Vanderbilt Mortgage & Finance, also doing business as Silverton Mortgage, is accused of violating the Truth in Lending Act and Regulation Z. Regulation Z requires all mortgage lenders to document and verify a borrower’s income to determine whether the borrower: your ability to repay the loan you are applying for;
Vanderbilt, which primarily finances homes built by parent company Clayton Homes, “ignored obvious red flags that certain consumers would not be able to repay their loans on time,” Consumer Finance said. The Department of Protection argued. January 6 complaint.
In a statement to Inman, Vanderbilt characterized the CFPB’s allegations as “baseless, false and…the latest example of politically motivated regulatory overreach.”
Vanderbilt said the CFPB investigated “tens of thousands of loans” and “identified less than 0.8% of loans over a six-year period that should not have been made.” Vanderbilt “has followed the law and the facts support it,” the company said.
Clayton Homes says on its website that it “opens the door to a better life” by “selling affordable modern homes.” Clayton Homes claims that the company and its subsidiaries, including Schult Homes, Crest Homes, Karsten Homes, Golden West Homes, and SEhomes, built more than 52,000 manufactured and field-built modular homes across the United States in 2023. .
The CFPB said in its complaint that Vanderbilt used “implausible estimates” of monthly expenses and that borrowers paid their mortgages, “kept food on the table” and paid for other living expenses. They argued that they had underestimated the amount they needed to cover.
In some cases, lenders violated their own policies and offered housing even though it was calculated by Vanderbilt’s “artificially low” cost of living (not adjusted to account for rising mortgage costs). Loans were given to borrowers who lacked the income to cover the mortgage and basic living expenses. The government claimed they lived in different parts of the country.
Rohit Chopra
CFPB Director Rohit Chopra said in a statement that “Vanderbilt knowingly places people into risky loans in order to close home sales transactions.” “The CFPB’s lawsuit seeks to protect not only homebuyers, but also the honest lenders who help people buy affordable homes.”
Records maintained by National Multistate Licensing show that Vanderbilt, a non-bank lender, has investments in Alabama, Arizona, Florida, Georgia, Indiana, Kentucky, Missouri, North Carolina, Ohio, South Carolina, We sponsor 287 mortgage originators working in 35 branches across Tennessee. System (NMLS).
The CFPB alleges that Vanderbilt uses a “residual income model” to determine whether a borrower has the ability to repay the mortgage loan he or she is applying for. This model deducts the applicant’s self-reported monthly expenses such as food, medical expenses, gas, and utilities from their monthly income to see if they can also make the monthly loan payment.
In cases where a borrower self-reports living expenses of $0, the City of Vanderbilt substitutes its own cost-of-living estimate based on family size, which “is unreasonable for a single borrower and increases as the borrower’s family size increases.” “As the case progresses, it becomes increasingly unreasonable,” the prosecutor argued.
In one example cited in the CFPB’s complaint, Vanderbilt estimated that a family of five who had already collected seven debts would be left with a net monthly income of only $57.78 if they took out a mortgage. , approved the loan which became delinquent after one year. .
In another case, the city of Vanderbilt approved a mortgage for a single mother with two dependents and nine debts, but the lender calculated it would leave her with no residual income. The CFPB alleges that she defaulted on her mortgage payments in just four months, resulting in the loan being foreclosed on.
The CFPB also noted more than 200 complaints it had received from consumers regarding Vanderbilt’s practices.
Vanderbilt said its underwriting process “goes beyond the legal requirement to evaluate a borrower’s ability to repay a loan by considering both monthly debt-to-income ratio and residual income, but the law does not require the use of either.” “We are only asking for the following.”
The company takes the greater of the borrower’s actual reported expenses or estimated living expenses based on family size, similar to those used in federal veterans loan programs, as required by law. He says he is doing more than just being there.
“Despite regularly congratulating Vanderbilt Mortgage’s underwriting practices in the past, the CFPB is now requiring compliance with new, unknown and unknowable ‘standards’ not covered by law.” ,” the company said. “Far from protecting American consumers, the CFPB’s lawsuit will deprive creditworthy borrowers of homeownership.”
Editor’s note: This article has been updated to include a statement from Vanderbilt Mortgage and Finance.
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