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Democrats Seek Discrimination Investigation of Berkshire Hathaway Unit

Senior U.S. Democratic lawmakers asked federal regulators to investigate whether Clayton Homes, the mobile home unit of Warren Buffett's Berkshire Hathaway Inc., targets minority borrowers with discriminatory lending and collection practices.

A letter on Tuesday from Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, and fellow committee members Michael Capuano, Emanuel Cleaver and Keith Ellison called on the Justice Department and the Consumer Financial Protection Bureau (CFPB) to "pursue appropriate corrective action" against Clayton.

It followed a report last month by the Seattle Times newspaper and online BuzzFeed News accusing the largest U.S. mobile home builder of exploiting black, Latino and Native American borrowers by driving them into subprime loans they cannot afford, and harming communities by repossessing homes after borrowers default.

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Billionaire Warren Buffett speaks in Washington in 2012. NICHOLAS KAMM / AFP - Getty Images file

That report also claimed that Clayton's corporate culture condones racism, including against its own workers.

The representatives said the "disturbing business model" described in the report was "highly problematic," in light of Clayton's "uniquely broad control of the manufacture, sale and financing of manufactured homes."

Their letter was reported earlier by the Seattle Times.

In a statement on Wednesday, Clayton said it was disappointed that the newspaper's reporting is being "accepted as fact rather than challenged as an unfortunate cobbling together of incomplete data and outlying anecdotes."

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Last month, the Maryville, Tennessee-based company "categorically and adamantly" denied discriminating against borrowers, and defended the practices of two lending arms, Vanderbilt Mortgage and Finance Inc. and 21st Mortgage Corp.

"Race and ethnicity are never considered in pricing or structuring our loans," the company said. Clayton also said it does not tolerate discrimination against its workers.

As of Sept. 30, Clayton borrowers were current on roughly 95 percent of their loans, Berkshire has said.

Buffett did not respond on Wednesday to an email request for comment sent to an assistant.

At Berkshire's annual meeting last May, Buffett said he made "no apologies whatsoever" about Clayton's "exemplary" lending.

He spoke in response to a question about an earlier Seattle Times story saying that Clayton trapped borrowers into unaffordable loans on depreciating homes.

A CFPB spokesman said that the agency was reviewing Tuesday's letter and "takes allegations of discriminatory or predatory lending practices very seriously."

The Justice Department was also reviewing the letter, a spokeswoman said.

Berkshire bought Clayton for $1.7 billion in August 2003.

The unit generates roughly 2 percent of overall pretax profit at Omaha, Nebraska-based Berkshire, which owns close to 90 businesses, including the Geico auto insurer, BNSF railroad and Dairy Queen ice cream stores.