MARYVILLE, Tenn. — The Consumer Financial Protection Bureau (CFPB) has filed a civil lawsuit against Vanderbilt Mortgage and Finance, Inc., accusing the Maryville-based lender of approving loans for individuals without properly assessing whether borrowers could afford to repay them. The lawsuit, filed Monday in the U.S. District Court for the Eastern District of Tennessee, alleges that Vanderbilt, which specializes in providing mortgages for manufactured homes, ignored critical warning signs during its underwriting process.
Vanderbilt Mortgage, a subsidiary of Clayton Homes, primarily finances loans for manufactured homes sold and built by its parent company. According to the CFPB, the lender’s practices disproportionately affected vulnerable, low-income borrowers who were ultimately saddled with loans they could not afford.
The CFPB’s lawsuit claims that Vanderbilt’s underwriting process failed to properly evaluate the financial stability of its customers. One major concern highlighted in the legal filing was the lender’s use of “implausible estimates” of borrowers’ living expenses, which the CFPB argues led to significant miscalculations in a borrower’s ability to repay their mortgage. In particular, the CFPB points to situations where borrowers with low residual incomes—after covering basic living expenses—were approved for loans, despite the fact that their financial situations indicated they were unlikely to keep up with the mortgage payments.
In one instance cited in the lawsuit, a single mother with two children was approved for a loan despite having a negative residual income of $0.50 per month. The CFPB claims that Vanderbilt used overly low estimates for living expenses based on the borrower’s family size, which failed to reflect the actual costs of basic necessities such as food, healthcare, and utilities. The lawsuit also notes that the borrower had multiple debts in collections, further undermining her ability to repay the mortgage.
Other examples include borrowers with net residual incomes of less than $75 per month, who were similarly given loans that they ultimately could not afford. The CFPB contends that these loans violate the Truth in Lending Act (TILA) and Regulation Z, which set forth minimum standards for mortgage underwriting and require lenders to assess whether a borrower can reasonably repay the loan.
In response to the lawsuit, a spokesperson for Vanderbilt Mortgage called the claims “unfounded” and maintained that the company’s underwriting processes meet or exceed legal requirements. The spokesperson also argued that the CFPB’s allegations are based on an arbitrary new standard that has not been addressed in federal law.
“The CFPB is now demanding compliance with an unknown and unknowable new ‘standard,’” the spokesperson said in a statement. “Far from protecting American consumers, the CFPB’s lawsuit will deprive creditworthy borrowers of owning a home.”
Despite this defense, the CFPB’s lawsuit seeks to permanently prevent Vanderbilt Mortgage from engaging in similar practices in the future. The regulatory agency is also requesting that the court impose penalties, restitution, and other damages, as well as other forms of relief deemed appropriate.
The lawsuit highlights concerns over the increasing risks of subprime lending, particularly in the manufactured home sector, where lower-income individuals may be particularly vulnerable to predatory loan terms. As the case moves through the courts, the outcome could have significant implications for the regulation of mortgage lenders and their responsibility to ensure borrowers’ financial stability.
