GALLUP, New Mexico – After a few years living with her sister, Rose Mary Zunie, 59, was ready to move into a place of her own.
So, on an arid Saturday morning this past summer, the sisters piled into a friend’s pickup truck and headed for a Clayton Homes sales lot here just outside the impoverished Navajo reservation.
The women — one in a long, colorful tribal skirt, another wearing turquoise jewelry, a traditional talisman against evil — were steered to a mobile home sales agent who spoke Navajo, just like the voice on the store’s radio ads.
He walked them through Clayton-built homes on the lot, then into the sales center, passing a banner and posters promoting one subprime lender: Vanderbilt Mortgage, a Clayton subsidiary. Inside, he handed them a Vanderbilt sales pamphlet.
“Vanderbilt is the only one that finances on the reservation,” he told the women.
His claim, which the women caught on tape, was a lie. And it was illegal.
It is just one in a pattern of deceptions that Clayton has used to help extract billions from poor customers around the country — particularly people of color, who make up a substantial and growing portion of its business.
The company is controlled by Warren Buffett, one of world’s richest men, but its methods hardly match Buffett’s honest, folksy image: Clayton systematically pursues unwitting minority home buyers and baits them into costly subprime loans, many of which are doomed to fail, an investigation by BuzzFeed News and the Seattle Times has found.
Clayton’s predatory practices
have damaged minority communities — from rural black enclaves in the
Louisiana Delta, across Spanish-speaking swaths of Texas, to Native
American reservations in the Southwest. Many customers end up losing
their homes, thousands of dollars in down payments, or even land they’d
owned outright.
Over the 12 years since Buffett’s Berkshire Hathaway bought Clayton Homes, the company has grown to dominate virtually every aspect of America’s mobile-home industry. It builds nearly half the new manufactured homes sold in this country every year, making it the most prolific U.S. home builder of any type. It sells them through a network of more than 1,600 dealerships. And it finances more mobile-home loans than any other lender by a factor of more than seven.
In minority communities, Clayton’s grip on the lending market verges on monopolistic: Last year, according to federal data, Clayton made 72% of the loans to black people who financed mobile homes.
The company’s in-house lender, Vanderbilt Mortgage, charges minority borrowers substantially higher rates, on average, than their white counterparts. In fact, federal data shows that Vanderbilt typically charges black people who make over $75,000 a year slightly more than white people who make only $35,000.
Through a spokesperson earlier this month, Buffett declined to discuss racial issues at Clayton Homes, and a reporter who attempted to contact him at his home was turned away by security.
Clayton and Berkshire Hathaway did not respond to numerous requests for interviews with executives, delivered by phone and email, as well as in person at Berkshire Hathaway’s headquarters in Omaha. The companies did not answer any of 34 detailed questions about Clayton and its practices. Nor did they respond to an extensive summary of this article’s findings, provided along with an invitation to comment.
On its website, Clayton says that it seeks to “treat people right” and “preserve our integrity above all else.”
(After publication of this article, Clayton issued a press release, accusing the reporters of “activism masquerading as journalism” and stating: “We categorically and adamantly deny discriminating against customers or team members based on race or ethnicity.” For two specific categories of loans, the company said, minorities pay the same or slightly lower interest rates than whites.)
Clayton has expanded its minority customer base — 31% of its loans
went to minorities last year, up from 22% in 2008 — with the help of
meticulous demographic analysis and targeted sales promotions.
Spanish-language ads in Texas promise Latino immigrants without Social
Security numbers that they, too, can enjoy the American dream of
homeownership.
As it drew in more Latino customers, however, Clayton’s practice was not to provide Spanish-speaking customers with translated loan documents or interpreters at closing — even after employees at headquarters complained that too many customers were being misled about loan terms.
Fair housing laws prohibit lenders from targeting and overcharging
people of color, whose communities historically were denied access to
credit.
Clayton’s practices are part of a corporate culture that has condoned racism, including black employees fired while white workers used discriminatory slurs and kept their jobs, and phone collectors casually insulting borrowers with racist stereotypes.
For an earlier story detailing Clayton’s widespread abuse of borrowers, a Clayton spokesperson said that the company helps customers find homes within their budgets and has a “purpose of opening doors to a better life, one home at a time.” Buffett later defended the company, telling Berkshire Hathaway shareholders he makes “no apologies whatsoever about Clayton’s lending terms.”
For this story, BuzzFeed News and the Seattle Times analyzed hundreds of internal company documents, thousands of legal and regulatory filings, more than 40 hours of internal company audio recordings, and federal data on hundreds of thousands of mobile-home loans over a decade. Reporters conducted interviews with more than 280 customers, employees, and experts, including some Clayton insiders who said they were appalled by the company’s practices.
Meanwhile, in the first nine months of this year, Clayton generated more than half a billion dollars in profit, up 28% from the same period last year.
“It’s a perpetual system of people who are never able to get themselves out of the hole,” said Gwen Schablik, who worked as a collector and handled borrowers’ bankruptcies at Clayton’s Maryville, Tennessee, headquarters from 2011 until she quit in 2014.
“I felt, ethically, I couldn’t continue working there,” she said.
Ashley said his bosses grew eager to push him out of his role
managing a Clayton lot in Arkansas, even suggesting he had taken some
furniture used to stage homes for sale that various employees brought in
and out of the lot — an accusation that another black manager in the
region reported facing around the same time. Both denied taking any
furniture.
When they offered Ashley a transfer to a sales lot far from his home, he said, he declined and eventually left his job in December 2012.
“I’m almost a 60-year-old man,” he said earlier this year. “It’s the first time — living in Arkansas my whole life — and it was truly the first time that I had experienced true racism.”
In at least six states, Clayton managers have permitted open racial hostility toward people of color, according to interviews and legal filings by more than 15 former workers with direct knowledge of the incidents. In at least seven cases documented in court records, sales reps — both black and white — were fired after complaining about racism on the job. Four cases were dropped or dismissed, and Clayton settled three.
After one of those firings in South Carolina in 2010, the company hired another black sales rep. But that man, Larry Summers, testified in court records that Clayton’s workers, despite his many requests, did not train him. He also said that he witnessed a co-worker make racist comments
and that black customers were treated with contempt. “When I was there,
I saw they treated black customers differently than what they did white
customers, you know?” he said in a deposition. “With their white customers, they’re more pleasant.” He said he soon quit Clayton.
In Baton Rouge, Louisiana, Clayton managers engaged in “malicious and reckless conduct” by allowing employees to harass and fire the store’s only black sales agent, according to a lawsuit filed by the federal government against the company in 2007.
A regional manager knew about the harassment, four former employees, including the victim, Melvin McNeal, said in interviews. McNeal said he complained about being called “Sambo” and “Buckwheat,” but managers defended his colleagues, saying they were “having fun” with him. Two of McNeal’s white co-workers backed up his complaints to managers, according to legal filings. They, too, reported being fired.
“I can’t help myself, I hate niggers,” McNeal’s main harasser told a contractor on the sales lot, according to a separate lawsuit filed by the two white co-workers. One of them remembered the harasser calling the sales lot “niggerville” when black customers arrived to tour homes.
The suit by the two white employees was dismissed for procedural reasons. Clayton settled the federal lawsuit, brought by the Equal Employment Opportunity Commission, in part by agreeing to end racial harassment. The company did not admit or deny wrongdoing.
Peter Shaw, who manages Clayton’s lot in Gallup, New Mexico, denied that his employees steer Navajo buyers to Vanderbilt loans. He is “100%” sure it doesn’t happen, he said, because the company trains its workers that doing so would be “strictly against the law.”
Yet in three dozen interviews, Clayton’s minority customers said they were led to believe that Vanderbilt was the only option to finance their homes.
One of the Navajo women at the Gallup lot recorded audio of their shopping experience,
including the exchange in which a sales agent told them Vanderbilt was
the only financing option on the reservation. Even after being told of
the recording and its contents, Shaw insisted that his employees follow
the law.
In fact, there is a range of options for financing mobile-home purchases on the reservation. Many lenders make loans under a federal program created in 1992 to improve Native Americans’ access to home financing. Known as the 184 Program, the subsidy guarantees that banks won’t lose money on the loans. This allows them to offer interest rates comparable to a prime home mortgage.
The Navajo Nation itself also offers loans to finance mobile homes. Louise Johnson, the head of the Navajo Nation’s credit services division, said Native leaders developed the program after seeing widespread repossessions of mobile homes on the reservation. Her division offers mobile-home loans with an interest rate often under 6.5% — half the rate paid by many Clayton borrowers. Yet few Navajo buyers end up borrowing from the tribe.
When he defended Clayton’s compliance with the law earlier this year, Buffett said the company’s lots use “lender boards” on their walls to show buyers the array of finance options to choose from. But the lender board at the Gallup lot, just five miles from Native territory, had no information about Navajo credit services. It did list a lender that participates in the federal program. In an interview, however, Shaw dismissed the program as a poor option for many borrowers.
The lender board also has a single large red button
labeled “PUSH ME.” By law, Clayton sales agents aren’t allowed to pitch
for Vanderbilt. But if they or a customer presses the red button, a
digital recording does it for them:
“Vanderbilt wants to finance your home. Fast approval. Friendly service. And less than perfect credit accepted,” a voice says. “Choose Vanderbilt!”
For years, sales agents received a bigger cut of the sales price if borrowers financed with Vanderbilt. That’s no longer the case, but management has imposed new pressures.
Clayton tracks each lot’s “capture rate,” or what percentage of its buyers borrow from Vanderbilt, internal records show. Managers receive reports that show how their capture rate ranks against other lots’ and how their rate has changed over time. Last year, dozens of lots had capture rates exceeding 70%, the records show.
Earlier this year, a Clayton retail vice president emailed fellow managers demanding that they explain why some stores fell short of their goals.
“I know some of you are frustrated with your capture rates, as well as [retail lots] not hitting their commitments,” Mark Morgan wrote in the email, a copy of which was obtained by BuzzFeed News and The Times. “They will never get to where we need them to be if they don’t buy in. We must help get them there.”
Vanderbilt and Clayton’s other lending division, 21st Mortgage, originated 53% of all mobile-home loans to Native Americans, 56% of loans to Latino and Hispanic borrowers, and 72% to blacks, according to 2014 federal loan data from some 7,000 lenders. Among white borrowers who were not also identified as Latino or Hispanic, Clayton’s market share was 31%.
Clayton was less reliant on lending to minorities in 2004, the first full year after Buffett’s Berkshire Hathaway bought the company for $1.7 billion. Around that time, then-marketing manager Robert Fox explained in a recent interview, Clayton was beginning to harness emerging research tools to help identify untapped markets.
After analyzing its Vanderbilt loan portfolio to understand the demographics of its customers, he recalled, Clayton then searched for areas where these market segments — people with similar characteristics — were clustered. For one presentation in 2005, Fox mapped Houston-area zip codes where these potential customers lived. Four of the five market segments he highlighted were identified as ethnically mixed.
“It was extremely cutting-edge for the manufactured home industry,” Fox said.
More recently, Clayton has drawn in minority borrowers with targeted marketing, such as sponsorship of a Lumbee Tribe powwow in North Carolina. Louisiana dealerships have advertised single-parent programs in a state where black families are more than twice as likely as white families to be headed by a single parent.
And in Texas, Clayton has blanketed parts of the state with ads, fliers, and promotions in Spanish. One store promised to spare buyers the frustration of dealing with “Spanglish” speaking sales agents: “Stop suffering, come to Clayton Homes in Seguin, where we will attend to you 100% in SPANISH !!!!” its website said.
Another lot’s Spanish-language ad addressed immigrants who have government tax ID numbers but no Social Security number: “No credit, no Social! Your ITIN and your promise is all we need!”
But when the time came to sign a legally binding loan, the company’s Spanish language skills disappeared: Its practice was to provide loan documents, full of dense legal jargon, in English and not to provide interpreters, according to 12 Spanish-speaking borrowers who purchased homes in Texas over the past few years.
That’s how Rocio Orozco, a single mother living in rural Willis, Texas, who speaks only enough English to carry on a simple conversation, said she ended up paying nearly double the interest rate she was promised — and losing $500 of her down payment to her local Clayton-owned dealer before she’d even signed the contract.
After driving past Clayton’s dealerships on her way to work each day,
Orozco, a manager at Subway sandwich shops, stopped at a Clayton-owned
lot in early 2012 to “window-shop,” she said in an interview conducted
through a translator. She said she told the sales reps that she didn’t
have good enough credit for a loan. Still, she recalled, the rep went to
lunch with her, talked to her about their families, and told her not to
give up hope.
Before Vanderbilt would process her application, Orozco recalled, she was asked for a $500 deposit, delivered on a blank money order. The loan for a double-wide came through, but the $500 disappeared. Documents indicate it was not credited against the cost of her home. In fact, the loan balance was inflated by $5,866 in fees and Clayton-brokered insurance, nearly as much as her down payment. She hadn’t noticed the additional charges until a reporter pointed them out.
She expressed further dismay when the reporter noted that she is paying a 14.2 annual percentage rate on the 20-year loan. The sales agent had told her she was approved at 8%, Orozco said. At the loan closing, the title agent referred by Clayton rushed her through the process, showing her only the blanks on pages requiring her signature, Orozco said.
“I said I couldn’t understand them, but they told me it was all simple, just stuff the bank required,” Orozco said. On the way out the door, she said, she was handed a stack of documents that she had never had a chance to review.
Among them was a loan application, prepared by Clayton, stating that she made $4,770 a month — far more, she said, than her actual take-home salary.
Joan Norman, Orozco’s sales agent, said she couldn’t imagine a case
where retail workers would ask for a money order to be left blank.
Norman, who no longer works for Clayton, could not explain why the $500
deposit was reflected on some documents but never applied against the cost of Orozco’s home.
Now facing monthly payments of about $1,000 that overwhelm her budget, Orozco said she is almost certain to lose the home.
“I’m so stupid,” she said. “I thought I could understand it myself, and trust them, because they were so nice. But that all changed the second I signed that paper.”
Gwen Schablik said stories like that make her blood boil. Schablik was one of a handful of Spanish speakers working in collections at Clayton back in 2012. Every week, she said, she took calls from people whose weak command of English led them to sign loan documents they couldn’t understand.
Schablik and another former employee said several Vanderbilt staffers had raised the issue with their superiors. Managers eventually told Schablik that there was no need to translate the documents, she said.
She continued to raise concerns, writing in an email to Clayton’s director of marketing that when she spoke to new borrowers, “there were many things they were not made aware about during the sale.”
Managers and executives, she said, dismissed her concerns; she recalled one replying, “It doesn’t really matter as long as we get the money.”
More than a dozen Spanish-speaking borrowers in Texas said they initially dealt with friendly, Spanish-speaking retail staff, only to be rushed through loan closings that the borrowers didn’t understand, conducted entirely in English. Many said they were surprised to find that the loan terms were much more costly than they’d been told.
The gap between Vanderbilt’s disclosed interest rates for whites and those for minorities — more than 0.7 percentage points on the annual rate — is the largest among big mobile-home lenders. That difference can amount to thousands of dollars over the life of an average loan. The disparity persists even after adjusting for income: Minority borrowers earning between $75,000 and $100,000 on average pay interest rates slightly higher than those paid by Vanderbilt’s white borrowers making only $25,000 to $50,000, according to a BuzzFeed News–Seattle Times analysis of recent federal loan data.
Some Clayton salespeople try to foist Vanderbilt’s costlier loans on
customers — in particular poor, minority borrowers — who may have less
familiarity with financial documents or who may be less likely to
question large tacked-on fees, said three former Clayton workers,
including Morris “Cubby” Stone, one of the white Baton Rouge employees
who reported being fired after defending a colleague who faced racial abuse.
For decades, until federal fair housing laws were introduced in the 1960s, banks routinely engaged in “redlining” — literally drawing red lines on maps around minority communities where they would refuse to make loans or open branches.
Clayton appears to have engaged in reverse redlining, seeking out minorities and charging them higher rates, according to a review of company documents, interviews, and an analysis of federal loan data. “Absolutely classic reverse redlining,” attorney John Relman called it.
The practice may violate the federal Fair Housing Act or the Equal Credit Opportunity Act, said Relman, who represented the city of Baltimore in a suit against Wells Fargo for reverse redlining. (The bank, which did not admit wrongdoing, settled, agreeing to spend millions of dollars on housing initiatives.)
(In its press release after this article’s publication, Clayton said that “we do not ‘target’ minority markets or engage in ‘reverse-redlining.’”)
In Louisiana, where Clayton controls 80% of the market for mobile-home loans to black people, the company sold Helen Shorts, a disabled grandmother, a loan she had virtually no chance of repaying.
Shorts, who is black, said she lost her previous home to a fire in 2013, leaving her and her family with almost nothing but the clothes they were wearing. Barely able to afford food, she said, they relied on handouts from churches and slept on friends’ floors.
When her insurance check finally arrived early last year, Shorts recalled, she and her husband, Leroy, were desperate to turn it into permanent housing for the three grandchildren they look after. She and a girlfriend drove more than 50 miles to a Clayton sales lot in Gonzales, Louisiana, which she said had advertised homes for as little as $7,000.
Shorts went into the store looking for payments of $300 to $400 a month, she said, something she could afford on her $749 in monthly disability benefits.
The sales agent, she recalled, later told her that she was lucky to qualify for a loan on a bigger, used mobile home priced at $55,000. Clayton financed it for her with a Vanderbilt loan at a 15.77 annual percentage rate, after a down payment of $7,000.
When she and Leroy returned for the closing, they said that, like many other buyers, they were rushed through it. Agents quickly turned over page after page, saying, “You need to sign right here, sign here, sign here,” recalled Leroy, who said he has been unable to work since he went blind in his right eye.
The monthly payments were $851 — about $100 more than the amount she received from her fixed disability payments. Shorts, who said she didn’t realize how much she would have to pay every month, made just two payments, then defaulted in June 2014. Clayton filed to seize the home that October.
Even when loans go bad quickly, the sale can be profitable for
Berkshire Hathaway. Clayton often marks up new homes about 70% over
invoice, company documents show. After a 20% down payment and thousands
of dollars in fees added into the loan, Clayton can recoup more than
half the wholesale price of the home in a year.
When borrowers stop paying, the company can repossess and resell the home, again with another markup.
“I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper — to be read by their spouses, children and friends — with the reporting done by an informed and critical reporter,” it reads.
“I’d pass by that and I was just like, are you kidding me?” said Schablik, the Spanish-speaking employee who, until last year, worked as a Clayton collector and handled borrowers’ bankruptcies.
At first, Vanderbilt collection agents — often young, white college
students or recent grads — are trained to do things by the book,
Schablik and four current and former collectors said. But when these new
agents begin working the phones, they said, managers pressure them to
be “mean” or “condescending,” for example telling customers behind in
their payments to cut back on groceries or forgo medical care.
Much of collectors’ take-home pay comes from bonuses tied to how many delinquent accounts they bring up to date. As a result, Schablik and several of her former colleagues said, many collectors resorted to tactics of questionable legality: making groundless threats, calling relatives or employers to apply pressure, or berating borrowers until they either cried or figured out how to get some money. Collectors typically were less abusive to white borrowers, they said.
Even when managers were within earshot, white agents openly ridiculed black borrowers, mimicking stereotpyical black vernacular on the phone, then referring to them as “niggers” after hanging up, Schablik and other current and former Clayton employees said. Two collectors recalled English-speaking co-workers talking to Latino borrowers, repeatedly saying, “No dinero, no casa.” One collector said she overheard a colleague ask a black borrower if she’d spent all of her money on a hair weave.
On the Navajo reservation, a customer named Sheila Begay said Vanderbilt collection agents told her that Navajo people are “too stupid” to understand loan terms. Her stepfather, Daniel Teller, said they told him Navajos were so poor that they never have money in their pockets. A neighbor, Wallace Archer, recalled a collector asking whether his family had spent all of their money on alcohol.
Tim Williams, the head of one of Clayton’s lending subsidiaries, 21st
Mortgage, said in a brief interview that his collectors are trained to
treat customers with respect. He said accusations that they demeaned
borrowers were “very, very unlikely” to be true.
“Believe it or not, not all customers are honest,” he said.
At the tail end of the Mississippi Delta, southeast of New Orleans, Jennifer Encalade said she was receiving calls from Clayton’s collection agents multiple times a day this summer. One afternoon, while a reporter was visiting, an agent named Jeremy called and began asking questions about her personal life, her financial status, and her family. She put the call on speakerphone.
Dissatisfied with her offer to send money after her next payday, Jeremy began to bat around ideas: Was there anyone she could borrow the money from? Was there anything she could pawn or sell? Why didn’t she try something?
As her 5-year-old son played quietly on the carpet, Jennifer asked:
“What would you suggest?”
“Uh, donate plasma?” Jeremy replied. “Or donate blood?”
On the Navajo reservation, geographically larger than the state of West Virginia, there are fewer than 50,000 occupied housing units of any kind. Clayton has sought to seize homes at least 691 times on the reservation in the past decade, according to a review of records from eight of the Navajo Nation’s 11 court districts.
In the rural farming town of Opelousas, Louisiana, Kevin Thibodeaux is trying to keep Vanderbilt from taking a piece of land on Lazard Lane that has been in his family for at least four generations. Along the lane are the homes of his mother, aunts, and uncles.
“When you turn down that road, it’s all family back here,” Thibodeaux said. “It goes deep, man.”
Like many black families in the area, the Thibodeauxs see owning land as a tangible expression of roots stretching back to Reconstruction and an economic toehold gained despite the legacy of slavery and the hardships of Jim Crow. In this community beset by poverty, land is many families’ most meaningful asset.
In 2009, Thibodeaux was working at Walmart and his wife at a pharmacy
as they raised three children. He figured their weak credit would make
it impossible to buy a home. When he visited a Clayton-owned retail lot,
however, he said the sales reps told him they could get him a loan — if
he put up a piece of land.
Thibodeaux had a parcel he’d bought from his aunt informally, years earlier. Employees at the Clayton-owned lot helped with the paperwork needed to make him the land’s official owner, he said, and he signed it over as collateral.
Thibodeaux said he was excited about a Clayton home model called “YES,” priced at $39,000. A Clayton saleswoman, he recalled, said she was trying to get him a government-insured loan. Nearly three months later, he said, she called and told him that Vanderbilt would be his lender. She did not mention that the same company that owned the retail lot also owned the lender, he said. His annual percentage rate ended up at 11.26.
In the months he waited for the loan to come through, the home’s price went up — to a little over $45,000, plus more than $7,000 in fees and insurance brokered by Clayton.
Within a couple of years, his wife had left him, leaving him with the kids, and he lost his job.
In light of his two years of steady payments, he said he asked Vanderbilt to adjust his monthly obligation until he got back on his feet. But, he said, “They gave me nothing. I tried everything talking to these people.”
Vanderbilt moved to seize Thibodeaux’s home in January 2014. He filed for bankruptcy protection and has been paying down his debts. With his new job as a school janitor, Thibodeaux hopes he can hold onto the house and land, but there are no guarantees.
Today, Thibodeaux shares the home with his girlfriend, Linda Lazard, and their children. Lazard, whose sister previously lost family land to Vanderbilt, can rattle off the names of nearby friends and relatives whose lives had been disrupted by the company’s aggressive lending and frequent repossessions.
“Boy, for Thanksgiving and holidays, we’ll hear something about Vanderbilt or somebody walking up and saying, ‘Oh, I got my house, and Vanderbilt financed me,’” Lazard said. “Everybody look like, ‘Lord Jesus, do you know what you just got yourself into?’”
With dusk falling over Lazard Lane’s majestic trees one evening this summer, Thibodeaux’s extended family gathered on his wide, patchy lawn for a cookout featuring fried turkey wings. As high school–age daughters practiced their cheer squad drills, Thibodeaux talked about his troubles with Clayton Homes and Vanderbilt Mortgage.
“They sold me a dream,” he said, pacing back and forth. “Everything changed after I bought the home.”
Mike Baker is an investigative reporter for the Seattle Times, and Daniel Wagner is an investigative reporter for BuzzFeed News. They previously reported on Clayton Homes in a joint investigation by the Times and The Center for Public Integrity.
Lanie Lee Cook and Guillermo X. Garcia contributed reporting to this story.
(Disclosure: Wagner has a sister who works as an attorney at a nonprofit law firm in West Virginia that has brought suits on behalf of low-income borrowers against most major home-loan lenders; a small fraction of the firm’s cases concern Vanderbilt.)
So, on an arid Saturday morning this past summer, the sisters piled into a friend’s pickup truck and headed for a Clayton Homes sales lot here just outside the impoverished Navajo reservation.
The women — one in a long, colorful tribal skirt, another wearing turquoise jewelry, a traditional talisman against evil — were steered to a mobile home sales agent who spoke Navajo, just like the voice on the store’s radio ads.
He walked them through Clayton-built homes on the lot, then into the sales center, passing a banner and posters promoting one subprime lender: Vanderbilt Mortgage, a Clayton subsidiary. Inside, he handed them a Vanderbilt sales pamphlet.
“Vanderbilt is the only one that finances on the reservation,” he told the women.
His claim, which the women caught on tape, was a lie. And it was illegal.
It is just one in a pattern of deceptions that Clayton has used to help extract billions from poor customers around the country — particularly people of color, who make up a substantial and growing portion of its business.
The company is controlled by Warren Buffett, one of world’s richest men, but its methods hardly match Buffett’s honest, folksy image: Clayton systematically pursues unwitting minority home buyers and baits them into costly subprime loans, many of which are doomed to fail, an investigation by BuzzFeed News and the Seattle Times has found.
Clara Daye, left, and her sister Rose Mary Zunie. Donovan Quintero for the Seattle Times
Over the 12 years since Buffett’s Berkshire Hathaway bought Clayton Homes, the company has grown to dominate virtually every aspect of America’s mobile-home industry. It builds nearly half the new manufactured homes sold in this country every year, making it the most prolific U.S. home builder of any type. It sells them through a network of more than 1,600 dealerships. And it finances more mobile-home loans than any other lender by a factor of more than seven.
In minority communities, Clayton’s grip on the lending market verges on monopolistic: Last year, according to federal data, Clayton made 72% of the loans to black people who financed mobile homes.
The company’s in-house lender, Vanderbilt Mortgage, charges minority borrowers substantially higher rates, on average, than their white counterparts. In fact, federal data shows that Vanderbilt typically charges black people who make over $75,000 a year slightly more than white people who make only $35,000.
Through a spokesperson earlier this month, Buffett declined to discuss racial issues at Clayton Homes, and a reporter who attempted to contact him at his home was turned away by security.
Clayton and Berkshire Hathaway did not respond to numerous requests for interviews with executives, delivered by phone and email, as well as in person at Berkshire Hathaway’s headquarters in Omaha. The companies did not answer any of 34 detailed questions about Clayton and its practices. Nor did they respond to an extensive summary of this article’s findings, provided along with an invitation to comment.
On its website, Clayton says that it seeks to “treat people right” and “preserve our integrity above all else.”
(After publication of this article, Clayton issued a press release, accusing the reporters of “activism masquerading as journalism” and stating: “We categorically and adamantly deny discriminating against customers or team members based on race or ethnicity.” For two specific categories of loans, the company said, minorities pay the same or slightly lower interest rates than whites.)
Warren Buffett, left, with Kevin Clayton, CEO of Clayton Homes, in front of one of the company’s mobile homes. Rick Wilking / Reuters
As it drew in more Latino customers, however, Clayton’s practice was not to provide Spanish-speaking customers with translated loan documents or interpreters at closing — even after employees at headquarters complained that too many customers were being misled about loan terms.
Clayton systematically pursues unwitting minority home buyers and baits them into costly subprime loans, many of which are doomed to fail.
Clayton’s practices are part of a corporate culture that has condoned racism, including black employees fired while white workers used discriminatory slurs and kept their jobs, and phone collectors casually insulting borrowers with racist stereotypes.
For an earlier story detailing Clayton’s widespread abuse of borrowers, a Clayton spokesperson said that the company helps customers find homes within their budgets and has a “purpose of opening doors to a better life, one home at a time.” Buffett later defended the company, telling Berkshire Hathaway shareholders he makes “no apologies whatsoever about Clayton’s lending terms.”
For this story, BuzzFeed News and the Seattle Times analyzed hundreds of internal company documents, thousands of legal and regulatory filings, more than 40 hours of internal company audio recordings, and federal data on hundreds of thousands of mobile-home loans over a decade. Reporters conducted interviews with more than 280 customers, employees, and experts, including some Clayton insiders who said they were appalled by the company’s practices.
Meanwhile, in the first nine months of this year, Clayton generated more than half a billion dollars in profit, up 28% from the same period last year.
“It’s a perpetual system of people who are never able to get themselves out of the hole,” said Gwen Schablik, who worked as a collector and handled borrowers’ bankruptcies at Clayton’s Maryville, Tennessee, headquarters from 2011 until she quit in 2014.
“I felt, ethically, I couldn’t continue working there,” she said.
Gwen Schablik, a former employee of Clayton Homes. Jessica Tezak for BuzzFeed News
“THEY TREATED BLACK CUSTOMERS DIFFERENTLY”
David Ashley’s problems at Clayton began after he became one of the few black employees to serve in management. One of Ashley’s subordinates called him a “coon,” and he fired her, he said. To his dismay, a regional manager overruled the decision and warned Ashley not to be so hasty, he said.
Poster in Clayton headquarters of Warren Buffett and his “rule of thumb.” Provided to BuzzFeed News
When they offered Ashley a transfer to a sales lot far from his home, he said, he declined and eventually left his job in December 2012.
“I’m almost a 60-year-old man,” he said earlier this year. “It’s the first time — living in Arkansas my whole life — and it was truly the first time that I had experienced true racism.”
In at least six states, Clayton managers have permitted open racial hostility toward people of color, according to interviews and legal filings by more than 15 former workers with direct knowledge of the incidents. In at least seven cases documented in court records, sales reps — both black and white — were fired after complaining about racism on the job. Four cases were dropped or dismissed, and Clayton settled three.
Federal data shows that Clayton Homes typically charges black people who make over $75,000 a year slightly more than white people who make between $25,000 and $50,000.
In Baton Rouge, Louisiana, Clayton managers engaged in “malicious and reckless conduct” by allowing employees to harass and fire the store’s only black sales agent, according to a lawsuit filed by the federal government against the company in 2007.
A regional manager knew about the harassment, four former employees, including the victim, Melvin McNeal, said in interviews. McNeal said he complained about being called “Sambo” and “Buckwheat,” but managers defended his colleagues, saying they were “having fun” with him. Two of McNeal’s white co-workers backed up his complaints to managers, according to legal filings. They, too, reported being fired.
“I can’t help myself, I hate niggers,” McNeal’s main harasser told a contractor on the sales lot, according to a separate lawsuit filed by the two white co-workers. One of them remembered the harasser calling the sales lot “niggerville” when black customers arrived to tour homes.
The suit by the two white employees was dismissed for procedural reasons. Clayton settled the federal lawsuit, brought by the Equal Employment Opportunity Commission, in part by agreeing to end racial harassment. The company did not admit or deny wrongdoing.
Mobile homes on the Clayton lot in Gallup, New Mexico. Donovan Quintero for the Seattle Times
HOW CLAYTON SELLS LOANS TO MINORITIES
Laws designed to protect consumers prohibit mobile-home sales reps from doing double duty as loan officers unless they obtain a separate license. They can sell the mobile home, but they may not guide buyers to a particular financing option.Peter Shaw, who manages Clayton’s lot in Gallup, New Mexico, denied that his employees steer Navajo buyers to Vanderbilt loans. He is “100%” sure it doesn’t happen, he said, because the company trains its workers that doing so would be “strictly against the law.”
Yet in three dozen interviews, Clayton’s minority customers said they were led to believe that Vanderbilt was the only option to finance their homes.
In fact, there is a range of options for financing mobile-home purchases on the reservation. Many lenders make loans under a federal program created in 1992 to improve Native Americans’ access to home financing. Known as the 184 Program, the subsidy guarantees that banks won’t lose money on the loans. This allows them to offer interest rates comparable to a prime home mortgage.
The Navajo Nation itself also offers loans to finance mobile homes. Louise Johnson, the head of the Navajo Nation’s credit services division, said Native leaders developed the program after seeing widespread repossessions of mobile homes on the reservation. Her division offers mobile-home loans with an interest rate often under 6.5% — half the rate paid by many Clayton borrowers. Yet few Navajo buyers end up borrowing from the tribe.
When he defended Clayton’s compliance with the law earlier this year, Buffett said the company’s lots use “lender boards” on their walls to show buyers the array of finance options to choose from. But the lender board at the Gallup lot, just five miles from Native territory, had no information about Navajo credit services. It did list a lender that participates in the federal program. In an interview, however, Shaw dismissed the program as a poor option for many borrowers.
On its website, Clayton says that it seeks to “treat people right” and “preserve our integrity above all else.”
“Vanderbilt wants to finance your home. Fast approval. Friendly service. And less than perfect credit accepted,” a voice says. “Choose Vanderbilt!”
For years, sales agents received a bigger cut of the sales price if borrowers financed with Vanderbilt. That’s no longer the case, but management has imposed new pressures.
Clayton tracks each lot’s “capture rate,” or what percentage of its buyers borrow from Vanderbilt, internal records show. Managers receive reports that show how their capture rate ranks against other lots’ and how their rate has changed over time. Last year, dozens of lots had capture rates exceeding 70%, the records show.
Earlier this year, a Clayton retail vice president emailed fellow managers demanding that they explain why some stores fell short of their goals.
“I know some of you are frustrated with your capture rates, as well as [retail lots] not hitting their commitments,” Mark Morgan wrote in the email, a copy of which was obtained by BuzzFeed News and The Times. “They will never get to where we need them to be if they don’t buy in. We must help get them there.”
Banner ads for Clayton financing, from various sales lots. Daniel Wagner for the Center of Public Integrity
ADS IN SPANISH, CONTRACTS IN ENGLISH
Clayton has been especially effective at capturing minority borrowers — and not just Native Americans.Vanderbilt and Clayton’s other lending division, 21st Mortgage, originated 53% of all mobile-home loans to Native Americans, 56% of loans to Latino and Hispanic borrowers, and 72% to blacks, according to 2014 federal loan data from some 7,000 lenders. Among white borrowers who were not also identified as Latino or Hispanic, Clayton’s market share was 31%.
Clayton was less reliant on lending to minorities in 2004, the first full year after Buffett’s Berkshire Hathaway bought the company for $1.7 billion. Around that time, then-marketing manager Robert Fox explained in a recent interview, Clayton was beginning to harness emerging research tools to help identify untapped markets.
After analyzing its Vanderbilt loan portfolio to understand the demographics of its customers, he recalled, Clayton then searched for areas where these market segments — people with similar characteristics — were clustered. For one presentation in 2005, Fox mapped Houston-area zip codes where these potential customers lived. Four of the five market segments he highlighted were identified as ethnically mixed.
“It was extremely cutting-edge for the manufactured home industry,” Fox said.
More recently, Clayton has drawn in minority borrowers with targeted marketing, such as sponsorship of a Lumbee Tribe powwow in North Carolina. Louisiana dealerships have advertised single-parent programs in a state where black families are more than twice as likely as white families to be headed by a single parent.
And in Texas, Clayton has blanketed parts of the state with ads, fliers, and promotions in Spanish. One store promised to spare buyers the frustration of dealing with “Spanglish” speaking sales agents: “Stop suffering, come to Clayton Homes in Seguin, where we will attend to you 100% in SPANISH !!!!” its website said.
Another lot’s Spanish-language ad addressed immigrants who have government tax ID numbers but no Social Security number: “No credit, no Social! Your ITIN and your promise is all we need!”
But when the time came to sign a legally binding loan, the company’s Spanish language skills disappeared: Its practice was to provide loan documents, full of dense legal jargon, in English and not to provide interpreters, according to 12 Spanish-speaking borrowers who purchased homes in Texas over the past few years.
That’s how Rocio Orozco, a single mother living in rural Willis, Texas, who speaks only enough English to carry on a simple conversation, said she ended up paying nearly double the interest rate she was promised — and losing $500 of her down payment to her local Clayton-owned dealer before she’d even signed the contract.
Rocio Orozco in front of her home. Scott Dalton for BuzzFeed News
Before Vanderbilt would process her application, Orozco recalled, she was asked for a $500 deposit, delivered on a blank money order. The loan for a double-wide came through, but the $500 disappeared. Documents indicate it was not credited against the cost of her home. In fact, the loan balance was inflated by $5,866 in fees and Clayton-brokered insurance, nearly as much as her down payment. She hadn’t noticed the additional charges until a reporter pointed them out.
She expressed further dismay when the reporter noted that she is paying a 14.2 annual percentage rate on the 20-year loan. The sales agent had told her she was approved at 8%, Orozco said. At the loan closing, the title agent referred by Clayton rushed her through the process, showing her only the blanks on pages requiring her signature, Orozco said.
“I said I couldn’t understand them, but they told me it was all simple, just stuff the bank required,” Orozco said. On the way out the door, she said, she was handed a stack of documents that she had never had a chance to review.
Among them was a loan application, prepared by Clayton, stating that she made $4,770 a month — far more, she said, than her actual take-home salary.
“It’s a perpetual system of people who are never able to get themselves out of the hole,” said Gwen Schablik, a former employee. “I felt, ethically, I couldn’t continue working there.”
Now facing monthly payments of about $1,000 that overwhelm her budget, Orozco said she is almost certain to lose the home.
“I’m so stupid,” she said. “I thought I could understand it myself, and trust them, because they were so nice. But that all changed the second I signed that paper.”
Gwen Schablik said stories like that make her blood boil. Schablik was one of a handful of Spanish speakers working in collections at Clayton back in 2012. Every week, she said, she took calls from people whose weak command of English led them to sign loan documents they couldn’t understand.
Schablik and another former employee said several Vanderbilt staffers had raised the issue with their superiors. Managers eventually told Schablik that there was no need to translate the documents, she said.
She continued to raise concerns, writing in an email to Clayton’s director of marketing that when she spoke to new borrowers, “there were many things they were not made aware about during the sale.”
Managers and executives, she said, dismissed her concerns; she recalled one replying, “It doesn’t really matter as long as we get the money.”
More than a dozen Spanish-speaking borrowers in Texas said they initially dealt with friendly, Spanish-speaking retail staff, only to be rushed through loan closings that the borrowers didn’t understand, conducted entirely in English. Many said they were surprised to find that the loan terms were much more costly than they’d been told.
Rocio Orozco with her son and daughter in their home. Scott Dalton for Buzzfeed News
MINORITIES PAY HIGHER RATES
Blacks, Latinos, and Native Americans tend to have lower median incomes and lower credit scores than white Americans. As a result, the loans they receive — for houses, cars, or virtually anything else — often have higher interest rates. So Vanderbilt is not alone in charging minority customers more, on average, to finance their mobile homes. What sets the company apart is just how much more.The gap between Vanderbilt’s disclosed interest rates for whites and those for minorities — more than 0.7 percentage points on the annual rate — is the largest among big mobile-home lenders. That difference can amount to thousands of dollars over the life of an average loan. The disparity persists even after adjusting for income: Minority borrowers earning between $75,000 and $100,000 on average pay interest rates slightly higher than those paid by Vanderbilt’s white borrowers making only $25,000 to $50,000, according to a BuzzFeed News–Seattle Times analysis of recent federal loan data.
For decades, until federal fair housing laws were introduced in the 1960s, banks routinely engaged in “redlining” — literally drawing red lines on maps around minority communities where they would refuse to make loans or open branches.
Clayton appears to have engaged in reverse redlining, seeking out minorities and charging them higher rates, according to a review of company documents, interviews, and an analysis of federal loan data. “Absolutely classic reverse redlining,” attorney John Relman called it.
The practice may violate the federal Fair Housing Act or the Equal Credit Opportunity Act, said Relman, who represented the city of Baltimore in a suit against Wells Fargo for reverse redlining. (The bank, which did not admit wrongdoing, settled, agreeing to spend millions of dollars on housing initiatives.)
(In its press release after this article’s publication, Clayton said that “we do not ‘target’ minority markets or engage in ‘reverse-redlining.’”)
In Louisiana, where Clayton controls 80% of the market for mobile-home loans to black people, the company sold Helen Shorts, a disabled grandmother, a loan she had virtually no chance of repaying.
Shorts, who is black, said she lost her previous home to a fire in 2013, leaving her and her family with almost nothing but the clothes they were wearing. Barely able to afford food, she said, they relied on handouts from churches and slept on friends’ floors.
When her insurance check finally arrived early last year, Shorts recalled, she and her husband, Leroy, were desperate to turn it into permanent housing for the three grandchildren they look after. She and a girlfriend drove more than 50 miles to a Clayton sales lot in Gonzales, Louisiana, which she said had advertised homes for as little as $7,000.
Shorts went into the store looking for payments of $300 to $400 a month, she said, something she could afford on her $749 in monthly disability benefits.
The sales agent, she recalled, later told her that she was lucky to qualify for a loan on a bigger, used mobile home priced at $55,000. Clayton financed it for her with a Vanderbilt loan at a 15.77 annual percentage rate, after a down payment of $7,000.
When she and Leroy returned for the closing, they said that, like many other buyers, they were rushed through it. Agents quickly turned over page after page, saying, “You need to sign right here, sign here, sign here,” recalled Leroy, who said he has been unable to work since he went blind in his right eye.
The monthly payments were $851 — about $100 more than the amount she received from her fixed disability payments. Shorts, who said she didn’t realize how much she would have to pay every month, made just two payments, then defaulted in June 2014. Clayton filed to seize the home that October.
When borrowers stop paying, the company can repossess and resell the home, again with another markup.
Helen Shorts stands outside her home with her husband, Leroy, and her grandchildren. William Widmer for BuzzFeed News
“NO DINERO, NO CASA”
Arriving at Clayton’s Maryville, Tennessee, headquarters each morning, collection workers and their colleagues shuffle past a poster of Warren Buffett pointing to his “rule of thumb.”“I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper — to be read by their spouses, children and friends — with the reporting done by an informed and critical reporter,” it reads.
“I’d pass by that and I was just like, are you kidding me?” said Schablik, the Spanish-speaking employee who, until last year, worked as a Clayton collector and handled borrowers’ bankruptcies.
Clayton advertised in Spanish. But customers say the long loan documents they were rushed through were in English, with no translation offered.
Much of collectors’ take-home pay comes from bonuses tied to how many delinquent accounts they bring up to date. As a result, Schablik and several of her former colleagues said, many collectors resorted to tactics of questionable legality: making groundless threats, calling relatives or employers to apply pressure, or berating borrowers until they either cried or figured out how to get some money. Collectors typically were less abusive to white borrowers, they said.
Even when managers were within earshot, white agents openly ridiculed black borrowers, mimicking stereotpyical black vernacular on the phone, then referring to them as “niggers” after hanging up, Schablik and other current and former Clayton employees said. Two collectors recalled English-speaking co-workers talking to Latino borrowers, repeatedly saying, “No dinero, no casa.” One collector said she overheard a colleague ask a black borrower if she’d spent all of her money on a hair weave.
On the Navajo reservation, a customer named Sheila Begay said Vanderbilt collection agents told her that Navajo people are “too stupid” to understand loan terms. Her stepfather, Daniel Teller, said they told him Navajos were so poor that they never have money in their pockets. A neighbor, Wallace Archer, recalled a collector asking whether his family had spent all of their money on alcohol.
Sheila Begay, on the land where her three-bedroom mobile home once stood. Donovan Quintero for the Seattle Times
“Believe it or not, not all customers are honest,” he said.
At the tail end of the Mississippi Delta, southeast of New Orleans, Jennifer Encalade said she was receiving calls from Clayton’s collection agents multiple times a day this summer. One afternoon, while a reporter was visiting, an agent named Jeremy called and began asking questions about her personal life, her financial status, and her family. She put the call on speakerphone.
Dissatisfied with her offer to send money after her next payday, Jeremy began to bat around ideas: Was there anyone she could borrow the money from? Was there anything she could pawn or sell? Why didn’t she try something?
As her 5-year-old son played quietly on the carpet, Jennifer asked:
“What would you suggest?”
“Uh, donate plasma?” Jeremy replied. “Or donate blood?”
Banner ads for Clayton financing. Daniel Wagner for the Center of Public Integrity
“THEY SOLD ME A DREAM”
In minority communities across the American South where Clayton has established dominance, the company seizes homes and land and resells them in a churn that strips individuals of their assets and prevents communities from holding and building wealth.On the Navajo reservation, geographically larger than the state of West Virginia, there are fewer than 50,000 occupied housing units of any kind. Clayton has sought to seize homes at least 691 times on the reservation in the past decade, according to a review of records from eight of the Navajo Nation’s 11 court districts.
In the rural farming town of Opelousas, Louisiana, Kevin Thibodeaux is trying to keep Vanderbilt from taking a piece of land on Lazard Lane that has been in his family for at least four generations. Along the lane are the homes of his mother, aunts, and uncles.
“When you turn down that road, it’s all family back here,” Thibodeaux said. “It goes deep, man.”
Like many black families in the area, the Thibodeauxs see owning land as a tangible expression of roots stretching back to Reconstruction and an economic toehold gained despite the legacy of slavery and the hardships of Jim Crow. In this community beset by poverty, land is many families’ most meaningful asset.
A collection agent was overheard asking a black borrower if she’d spent all of her money on a hair weave. A Navajo customer was asked whether his family had spent all of its money on alcohol.
Thibodeaux had a parcel he’d bought from his aunt informally, years earlier. Employees at the Clayton-owned lot helped with the paperwork needed to make him the land’s official owner, he said, and he signed it over as collateral.
Thibodeaux said he was excited about a Clayton home model called “YES,” priced at $39,000. A Clayton saleswoman, he recalled, said she was trying to get him a government-insured loan. Nearly three months later, he said, she called and told him that Vanderbilt would be his lender. She did not mention that the same company that owned the retail lot also owned the lender, he said. His annual percentage rate ended up at 11.26.
In the months he waited for the loan to come through, the home’s price went up — to a little over $45,000, plus more than $7,000 in fees and insurance brokered by Clayton.
Within a couple of years, his wife had left him, leaving him with the kids, and he lost his job.
In light of his two years of steady payments, he said he asked Vanderbilt to adjust his monthly obligation until he got back on his feet. But, he said, “They gave me nothing. I tried everything talking to these people.”
Vanderbilt moved to seize Thibodeaux’s home in January 2014. He filed for bankruptcy protection and has been paying down his debts. With his new job as a school janitor, Thibodeaux hopes he can hold onto the house and land, but there are no guarantees.
Today, Thibodeaux shares the home with his girlfriend, Linda Lazard, and their children. Lazard, whose sister previously lost family land to Vanderbilt, can rattle off the names of nearby friends and relatives whose lives had been disrupted by the company’s aggressive lending and frequent repossessions.
“Boy, for Thanksgiving and holidays, we’ll hear something about Vanderbilt or somebody walking up and saying, ‘Oh, I got my house, and Vanderbilt financed me,’” Lazard said. “Everybody look like, ‘Lord Jesus, do you know what you just got yourself into?’”
With dusk falling over Lazard Lane’s majestic trees one evening this summer, Thibodeaux’s extended family gathered on his wide, patchy lawn for a cookout featuring fried turkey wings. As high school–age daughters practiced their cheer squad drills, Thibodeaux talked about his troubles with Clayton Homes and Vanderbilt Mortgage.
“They sold me a dream,” he said, pacing back and forth. “Everything changed after I bought the home.”
The billionaire philanthropist Warren Buffett controls a mobile-home empire that promises low-income borrowers affordable houses. But all too often, it traps those owners in high-interest loans and rapidly depreciating homes. Other stories in this series are here.
Lanie Lee Cook and Guillermo X. Garcia contributed reporting to this story.
(Disclosure: Wagner has a sister who works as an attorney at a nonprofit law firm in West Virginia that has brought suits on behalf of low-income borrowers against most major home-loan lenders; a small fraction of the firm’s cases concern Vanderbilt.)
UPDATE
This post has been updated to reflect a response from Clayton Homes issued after this article was published.
Daniel Wagner is an investigative reporter for BuzzFeed News and is based in Washington, D.C.
Contact Daniel Wagner at Daniel.Wagner@buzzfeed.com.
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