Say it ain't so, Warren.
Billionaire Warren Buffett, the 'Oracle from Omaha' is the CEO, president, and largest shareholder of the Berkshire Hathaway holding company. He is also frequently regarded as one of the too few bright spots in what might be called progressive capitalism: a champion of higher tax rates for billionaires than for their secretaries, a major donor to Barack Obama's campaigns, and an opponent of the inter-generational transfer of great wealth who has pledged to leave his fortune to charity, including an 83% stake to the Bill and Melinda Gates Foundation.
Yet, according to a new report from the Center for Public Integrity and the Seattle Times, Buffett is also one of America's leading predatory home lenders, via his Berkshire Hathaway subsidiary, Clayton Homes - the country's largest mobile home builder.
Buffett's Berkshire Hathaway acquired struggling mobile home builder Clayton Homes in 2003, then invested billions more building it into the mobile home industry’s biggest manufacturer and lender by buying up failed competitors, factories, and troubled loans. At the time of the acquisition, Buffett told Berkshire Hathaway shareholders:
Lenders should require “significant down payments and shorter-term loans,” Buffett wrote.
He called 30-year loans on mobile homes “a mistake,” according to notes taken by Tilson during Berkshire Hathaway’s 2003 shareholders meeting.
“Home purchases should involve an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrower’s income,” Buffett later wrote. “That income should be carefully verified.”
But, according to the new CPI/Times report, Clayton Homes' reality is quite the opposite:
More than a dozen Clayton customers described a consistent array of deceptive practices that locked them into ruinous deals: loan terms that changed abruptly after they paid deposits or prepared land for their new homes; surprise fees tacked on to loans; and pressure to take on excessive payments based on false promises that they could later refinance [....] Buyers told of Clayton collection agents urging them to cut back on food and medical care or seek handouts in order to make house payments. And when homes got hauled off to be resold, some consumers already had paid so much in fees and interest that the company still came out ahead. Even through the Great Recession and housing crisis, Clayton was profitable every year, generating $558 million in pre-tax earnings last year.
Clayton provided more than half of new mobile-home loans in eight states. In Texas, the number exceeds 70 percent. Clayton has more than 90 percent of the market in Odessa, one of the most expensive places in the country to finance a mobile home. To maintain its down-to-earth image, Clayton has hired the stars of the reality TV show Duck Dynasty to appear in ads.
Both the CPI/Times report and
an article today at Marketwatch note that Berkshire Hathaway spokespersons have declined to comment regarding these revelations.
Please read the full investigative report, then let Buffett know we expect better of him.
Mr. Buffett: Shame on you. Fix this. Now.