The Consumer Financial Protection Bureau has sued a Tennessee-based nonbank mortgage provider for allegedly failing to make good-faith determinations of their customers’ ability to repay their loans, as required by the Truth in Lending Act and Regulation Z.
In a lawsuit brought against Vanderbilt Mortgage and Finance, the CFPB alleges the company manipulated lending standards when borrowers did not make sufficient income, used artificially low estimates of living expenses that made no adjustment for higher expenses in different geographic areas, and made loans to borrowers that it projected that they could not pay. Vanderbilt is a unit of Clayton Homes, which is the largest manufactured home builder in the U.S.
The lawsuit seeks to stop the company’s alleged conduct, to provide relief for harmed consumers and to impose a civil money penalty that would be paid into the CFPB’s victims relief fund.
According to ABA’s mortgage policy team, the suit provides insight into how the CFPB applies the Ability-to-Repay/Qualified Mortgage Rule provisions to specific real-world mortgage loans. There are few cases interpreting the ATR regulations, particularly after the December 2020 rule amendments that eliminated the temporary GSE qualified mortgage and added a new permanent category of qualified mortgages. The ATR rule is part of Dodd-Frank and requires a creditor to make a reasonable, good faith determination of a consumer’s ability to repay a residential mortgage loan according to its terms. The rule also defines several categories of “qualified mortgage” loans.
