“There are lies, damn lies and statistics.” Mark Twain
“In my case, using what politely might be called “advocacy journalism,” I’ve used reporting as a weapon to affect political situations that bear down on my environment.” – Hunter S. Thompson
“Minorities exploited by Warren Buffett’s mobile-home empire (sic)” The Seattle Times/Buzz Feed
“…The Seattle Times account simply follows the long-time line of denigrating “trailers,” all in the name of selling more papers and creating notoriety. The fact that the story can be directed to ensnare Warren Buffett, billionaire investor, just adds to the article’s appeal to the public; his involvement with the industry posed as a negative catch point.” – Marty Lavin, JD – manufactured housing lending expert
Writing for The Seattle Times, BuzzFeed and previously in The Center for Public Integrity (CPI), Mike Baker and Daniel Wagner have continued their tag team assault on Warren Buffett and Berkshire-Hathaway’s Clayton Homes and related manufactured housing lending companies, Vanderbilt Mortgage and Finance (VMF) and 21st Mortgage and Finance (21st). Baker and Wagner have recently published a more than 6000-word report that claims, “Clayton Homes has used a pattern of deception 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 …”
Clayton Homes has issued a detailed denial in, “Reporting Mischaracterizes Clayton Homes’ Treatment of Customers and Employees – Company Serves Underserved Markets, Making Homeownership Affordable.”
With affordable housing a hot-button topic, and with the U.S. Census Bureau stating that manufactured housing is the #1 supplier of new homes under $150,000, MHLivingNews asked key players in the MH and media arena about this heated issue for their expert input. Virtually everyone we asked provided a rapid reply, with one notable exception. Who that is, and why that matters, will be revealed below.
At the heart of their latest Buffett takedown story, The Seattle Times’ Baker and Wagner (who earlier this year moved from CPI to BuzzFeed), are some key questions.
Is Clayton Homes – and, by shamelessly blatant association, Warren Buffett/Berkshire Hathaway (BH) – guilty of taking advantage of the poor?
Are the BH-affiliated firms of Clayton Homes and their subsidiaries, including Vanderbilt Mortgage and Finance (VMF) and 21st Mortgage Corporation (21st) guilty of racism and discriminatory policies?
Even if some of the specific examples cited by the reporters took place, are there other explanations for those instances named — such as disgruntled former employees?
If this is a case of advocacy journalism, what is it that Baker and Wagner are advocating for?
Having linked the two sides’ respective stories above, we will examine what our sources are telling MHLivingNews.
Minorities Sound off on Clayton Homes and 21st Mortgage Corporation
We asked African-American and Hispanic professionals currently in manufactured housing, or who have recently left the industry, about the allegations of racism and discrimination by the Berkshire-Hathaway manufactured housing divisions they have worked with.
“We are an independent manufactured home retailer, and among the brands we carry is Clayton Homes’ TruMH models,” said Gus Rodriguez, owner, of Tejas Homes, in Conroe, Texas. “Neither I nor my staff have ever experienced anything from their company that would smack of racism.”
Rodriguez elaborated on the lending topic. “We use 21st Mortgage and Finance Corporation as one of our lenders. Have we seen any lending discrimination based on race? Absolutely not.”
“I am a Hispanic retailer, with a large Hispanic customer base.” Rodriguez said. “I would not tolerate any predatory lending practice with any of our customers. Our relationship with 21st Mortgage and the customers they approve for financing is based on credit worthiness and their ability to pay.”
It should be noted that Rodriquez employs other Hispanics, and competes against a Clayton-owned retail store in his market.
Other MH Lenders and Experts – On and Off the Record
Marty Lavin, JD, has been interviewed by MHProNews before. He tells it like he sees it, so his opinions are at times controversial within the ranks of manufactured housing. He isn’t Donald Trump, but he similarly can claim that he isn’t beholding to anyone: he is successful. He has served a GSE, and knows their thinking and having made tens of millions in loans on manufactured housing, he is a true expert on the subject of MH lending.
As result of his decades of experience, when someone contacts us, looking for expert, objective insights, Lavin’s name is one that may be shared, as was the case that led to his being interviewed by the Deseret News, at this link, about manufactured housing.
Lavin, like Rodriguez and others we interviewed, was asked to read and comment on-the-record about what he found in Baker/Wagner’s The Seattle Times/BuzzFeed report and the Clayton Homes official response.
When asked about the allegation against Clayton’s lenders that minorities were paying a higher interest rate, Lavin replied that “…anyone with rudimentary loan knowledge knows well that just because a person who is of color makes $100,000 per year and pays a greater interest rate than a white making $35,000 per year, that of itself is not racist per se. Lenders look at demonstrated ability and desire to meet loan commitments, which are not locked to income. The better the payment record, the lower the rate. That is what drives the interest rate once loan qualification is determined.”
About Clayton Homes and its leader, Kevin Clayton, Lavin said: “I personally know him, like him and hold him in high regard. I have a very hard time seeing the Kevin I know supporting some of the racist actions described in the account. While there are too many incidents to overlook, I do not believe the people I know at Clayton/Vanderbilt would initiate or condone the racist behavior alleged in the article. If, for no other reason, the folks at leadership there are flinty-eyed businessmen, and they know that in today’s world a southern U.S. company, building and selling low-cost housing to many minorities and low income individuals, will be rigorously regulated by government and the all-powerful nonprofits. This is especially true when you are building and financing that old bugaboo, manufactured housing.”
A senior executive at an MH lending operation told MHLivingNews, on condition of anonymity, that: “Every MH loan is reviewed by a lender different than the approving lender. This review includes any rate or term errors or differences that are not in keeping with our current rate sheet. This review is signed and made a part of the credit file.” When asked to clarify, this long-time lending professional confirmed that by “lender,” in this case he meant loan officer.
He continued, “Our hired third-party audit firm also looks for any possible rate discrimination issues, compliance with fair housing laws and adherence to loan policy. This report goes directly to the president …”
MHLivingNews knows from sources inside the Berkshire-Hathaway lending units that audits by third parties are ongoing — so much so, that there is space set aside in their office for auditors to work. We asked a competing manufactured home lender if they had a similar scenario.
Barry Noffsinger is in management at CU Factory Built Lending, an award-winning manufactured home lending operation that is a division of
San Antonio Credit Union (SACU). Their firm originates new loans, as well as refinancing of manufactured homes. When asked about third-party audits of lenders such as VMF or 21st Mortgage, including from state or federal officials, Noffsinger said, “In lending that’s SOP. We have the NCUA auditing us at any time and as a prudent, reputable lender we welcome it.”
Noffsinger went on to say, “I think checks and balances are good for all stakeholders, whether it’s an internal or external audit, regardless of left, right or center prospective.” It should be noted that as a division of a credit union, Noffsinger and company have a positive relationship with consumer-focused advocacy groups. He and they are sensitive to any sense of impropriety.
The point is, there are so many safeguards all lenders face in the Dodd-Frank era — notably in manufactured housing — that it would be nearly impossible to carry out the kind of institutional racism or discriminatory tactics that the Baker/Wagner report alleges.
We should note that Berkshire-Hathaway related firms, which we contacted for on-the-record replies, politely referred us to the official statement made by Clayton Homes.
By contrast, when MHLivingNews asked Baker at The Seattle Times specific questions about their motivations and other issues related to the report, we got – nada. More on the questions put to them that they declined to answer, later.
Avoiding Berkshire-Hathaway’s alleged “mouthpiece,” but getting informed feedback from MH Insiders
The Manufactured Housing Institute (MHI) has at times been characterized, fairly or not, as the mouthpiece of Clayton Homes/VMF and 21st Mortgage. As someone who is in regular attendance at MHI meetings, I can say that a variety of viewpoints are present and represented. But for the purposes of this critique and analysis of The Seattle Times/Clayton Homes controversy, we deliberately did not ask for comments from MHI.
We did ask for comments from MHI’s rival association, the Manufactured Housing Association for Regulatory Reform (MHARR). They thanked us for the opportunity to sound off, but declined comment. It should be noted that for many years, it was common for the two associations to undercut each other privately or publicly. The fact that MHARR opted to say nothing bad about Clayton Homes/VMF or 21st Mortgage is noteworthy.
A number of MH professionals associated with MHARR’s independent producers have told us off-the-record that they respect the Clayton organization, and their related lending units. Given the fact that these are competitors in every sense, that, too should be insightful.
A well-connected and informed MH finance professional told us on condition of anonymity that:
If the BH companies do seven times the number of loans, then it stands to reason that they would be making more loans to minorities.
The BH companies are the only national lenders in the sub-650 credit market; therefore, the rates charged seemed to reflect that those sub-650 loans would go to them.
Many lenders are reluctant to lend on Native American land because recovery in the event of default can often be difficult.
The Seattle Times can no longer complain about high-cost loans, so now it’s high-priced, which virtually all MH loans are classified.
How do minorities’ credit records compare with non-minorities? Could that be relevant?
6. I think the advocacy issue is they are advocating for their opposition to legislation.
The finance expert’s first point, above, directly undercuts an issue that Baker and Wagner kept hammering on in their Seattle Times/BuzzFeed report).
Point #4 is a technical term, regarding rates and terms under Dodd-Frank, which MHLivingNews has previously detailed — that with no secondary loan market and no federal loan guarantees, the rates on MHLoans can be higher, but the payments are still significantly lower, given that manufactured homes cost so much less than conventional housing.
On point #6, the finance professional is suggesting that the writers are opposed to any changes to Dodd-Frank, which is the subject of pending legislation in Congress — The Preserving Access to Manufactured Housing Act (HR 650/S 682) — changes that have already passed the House with bi-partisan support, and is pending in the Senate.
Another off-the-record comment by a competing lender’s executive said, in part, that, “We will let Clayton address their social issues. We (and I would like to think them) are color blind, except for the color “green.”
More than one party we contacted said that any organization the size of Clayton and its lending divisions could, from time to time, experience someone who violates corporate and federal policies. In essence, Clayton’s official statement hints at some kind of violation, because they admit to having a very modest level of fines.
But objectively, Clayton Homes and their lenders stand on solid ground, precisely because the fines they’ve had are so tiny compared to their huge sales and loan volumes.
If there was institutional racism, or a pattern of discrimination as alleged by Baker and Wagner’s voluminous story, the fines would be in the millions. Because there is no doubt that with conversations routinely being recorded by lenders’ loan officers, collectors and others – with the kind of disclaimer that consumers have come to know so well – “This call is being recorded for quality and training purposes” — the evidence for discrimination would be heard and available in their documents.
In that light, Clayton’s statement brings clarity to the charges against them:
“In the last two years alone, we had 64 routine federal and state examinations and regulator-reviews. These assessments have included detailed reviews of originations, servicing, collections, advertising, compliance management, internal controls, and a variety of other areas of our operations. The Vanderbilt and 21st Mortgage portfolios examined contained over 320,000 loans totaling approximately $12 billion. While other companies and industries have faced costly fines, sometimes in the billions of dollars, the total fines resulting from the 64 reviews was less than $40,000 over the two-year period.”
A competitor’s senior manager made the following comment about The Seattle Times/BuzzFeed allegation of racial and discriminatory practices on Native American reservations, and with other minority groups:
“Vanderbilt/21st is probably the only lender that has a relationship with sales centers that finance on reservations. Most of the industry lenders do not use the 184 program. Why does the Navajo Nation’s credit-service division not finance more? Is it because of credit, awareness, etc.? All the sales center wants is the price of the home, regardless of where the money comes from.”
The federally backed 184 loan program for Native Americans — which deals with mortgage loans, not so-called chattel loans — was referenced in Baker/Wagner’s attack article on Clayton and its related lending firms. Given that a majority – about two out of three – manufactured home buyers who finance their homes opt for a personal property or chattel loan, the Baker/Wagner reference to the 184 loan program is akin to a red-herring — an irrelevant distraction, another non-issue.
Is the Seattle Times/BuzzFeed article “advocacy journalism,” as Clayton Homes claims?
It should be noted that the same writers, in a prior Seattle Times/Center for Public Integrity article that likewise targeted Buffett, Berkshire-Hathaway, Clayton Homes and their lenders was called out by Lawrence A. Cunningham of George Washington University. Cunningham, in an article published in ValueWalk stated: “Notably, it also came out that one of the writers, Mr. Wagner, had an undisclosed conflict of interest: His sister is a lawyer representing plaintiffs in lawsuits against Clayton Homes.”
That certainly constitutes a conflict of interest that was only disclosed by Baker/Wagner after Professor Cunningham revealed it.
MHLivingNews asked Lisa Tyler, Ph.D., for her observations about the Seattle Times article.
Tyler’s doctorate is in business administration and her dissertation was on the subject of “Examining Community Attitudes Toward Manufactured Housing.”
Tyler stated, “The SeattleTimes/BuzzFeed article has lots of what looks like data, but does not include any unbiased support that would merit professional respect. It is a form of advocacy journalism, period.”
Tyler’s comments are of interest on multiple levels, because she has lived in manufactured housing herself, and spent a number of years working in the industry with an independent operation. When asked about her impression of the issue of institutional racism or deliberate discrimination, she told MHLivingNews that:
“Clayton Homes/21st Mortgage/Vanderbilt has not to my knowledge ever engaged in institutional racism. There is no reason for them to participate in discriminatory lending practices. Clayton offers quality-for-value homes for sale to the public. Vanderbilt/21st Mortgage offer financing options to those who may not meet the credit requirements of traditional mortgages. Together, the companies offer the opportunity for home ownership to millions of consumers.”
Tyler, who is the Academic Dean at Bethel University College of Professional Studies, concluded her comments by saying that while loans made to those who may have had credit bumps or other issues don’t always end successfully, that is the responsibility of the borrower, not the lender. Manufactured home lenders are required on the front end of the loan to document the consumers’ Ability to Repay (ATR), along with other federally mandated requirements.
Indeed, loan failures occur in all kinds of housing financing, as the conventional mortgage/housing meltdown of 2008 reminds us; it is not an issue limited to manufactured home lending.
Lies, Damn lies and Statistics – The Dark Side
We opened this analysis and commentary with a quote from Mark Twain, where he says tongue in cheek that statistics can be used to warp the truth so much it may be technically true, but is misleading to the point that mirrors a lie.
In typical advocacy journalism fashion, Baker and Wagner opened their report with a personal story of a household presented as victims of the big, bad Warren Buffett, Berkshire-Hathaway evil “mobile home” empire. One wonders if they timed the release with the newest version of Star Wars movies to conjure up images of the evil Dark Side of the Force.
In the BuzzFeed version of their report, they included a graphic similarly meant to literally color the view of their readers. That is what advocacy journalism is about, as is suggested by the other quote at the top of this analysis by the late Hunter S. Thompson. Stories masquerading as news are one of the many reasons that some mainstream journalists – from any side of the political aisle – are often held in such disrepute these days, ranking below Congress in public opinion surveys. That’s pretty low.
Let’s quote from the facts presented by Clayton Homes in their published reply, which an update by Baker and Wagner to their original report does not challenge:
“A borrower’s income is not a factor in determining the specific interest rate for which they qualify – whether they make $35,000 or $75,000. It is, however, a significant consideration in the company’s analysis of the borrower’s ability to repay the loan. The article further mischaracterizes our interest rates because of the reporters’ reliance on raw data that ignores important factors that determine a borrower’s rate, including credit score, down payment, loan size, collateral, and land type. When these factors are taken together, there is a more accurate picture of interest rates. For example, in 2015, for borrowers with credit scores less than 600, who chose to purchase a home-only placed on private land, and borrowed less than $50,000, the average note rate from Vanderbilt Mortgage was the same for white and non-white borrowers. For borrowers with credit scores greater than 720, the average note rate for non-white borrowers was 0.07% less than that for white borrowers. Additionally, none of our rates exceed state or federal high-cost mortgage loan caps, and these loans had fixed rate and fully amortizing loan terms – not the risky loan features that contributed to the housing crisis”
The Bottom Line Is…
The bottom line, the various expert insights and experiences of MH professionals, an educator and an academic all suggest that Baker and Wagner crafted another slick looking hit piece on Buffett/Berkshire-Hathaway/Clayton Homes and their lenders. The question is, why? What would their motivation be for doing so?
We’ve read above one take on that question already. These two seem hell-bent to keep any change from occurring to the Dodd-Frank regulations that are in place. We will link below prior research done by MHLivingNews or MHProNews on that topic, none of which Baker and Wagner cited in their report, even though we know they have had access to all of them.
Why didn’t The Seattle Times/BuzzFeed/CPI cite or even attempt to refute any one of our original stories, or a heavily linked/documented column published in The Hill on manufactured home loan regulations and related? It is because the truth happens to be on the side of the industry’s professionals, who are striving mightily to reverse the CFPB’s errant policies with regard to MH lending, based upon the authority given them by the Dodd-Frank financial reform act? Those reports will be linked below, as an addendum to this column.
Frankly, it is NOT my purpose in this analysis to per se be a defender of Warren Buffett or Berkshire-Hathaway. They can take care of themselves. A disclosure on that and other points will follow below. The purpose of this critique and analysis is that respected MH industry firms have been unjustly smeared; we would defend any good operation that might similarly be unjustly attacked by the media, not just BH-related firms.
I wish I had said it, but one of our experts shared these pithy insights that directly relate to these issues:
“Oxymoron defined: Non-profits, government and consumer groups want to target nontraditional or underserved markets, however, when someone does, it is predatory. Credit in these markets are typically bruised, therefore you must account for the risk regardless of income. All three C’s (Collateral, Capacity and Character) must be in place for prudent lending regardless of the market.”
The bottom line is there might be one or more rogues here or there in any large organization. But the allegations of institutional racism or a pattern of discrimination or the image of Warren Buffett being portrayed as a heartless Democratic backer of Barack Obama and Hillary Clinton who just happens to want to take advantage of the poor is utter nonsense. The image of Buffett painted by Baker and Wagner is absurd, a point Lavin and others made.
As an industry veteran, this writer/publisher knows hundreds of professionals in scores of MH operations of all sizes. We have as current or past clients some of those noted herein. I sit on the Suppliers Division board of directors at the Manufactured Housing Institute (MHI), which some see as being a tool or mouthpiece for Berkshire-Hathaway connected firms.
That said, in tackling any story related to mainstream media reports about manufactured housing, we begin with our own strong desire for accuracy and fairness. It is our operation’s name – or my name – on the masthead or byline of the digital publication. We will not knowingly defend a bad actor in our industry.
I have at times personally taken positions at MHI meetings and in print that are contrary to the ones taken by members of Clayton Homes or their affiliated lenders. I have at times taken positions that are closer to those of the Manufactured Housing Association of Regulatory Reform (MHARR), a competing organization made up primarily of independent producers of HUD Code manufactured homes.
We take an independent view, guided by a search for the good of consumers and the MH industry at large.
So in this analysis, as with any other, fairness and accuracy toward the manufactured home industry and the 20+ million Americans it serves is our goal. We have, and will, call out those who we believe harm our industry, from within or without.
In this case, we are holding to account the writers Mike Baker and Daniel Wagner, those who published their work and are viewing the Clayton Homes response through the lens of their accuracy, too. There are advantages to knowing the various players in MH and being an industry trade publisher. We know from years of experience who to turn to for insights on a wide range of topics, lending being among them.
When racial discrimination reared its ugly head at a manufactured home community earlier this year, we did a series of reports on that – along with other incidents over the years – or wrongdoing by people in MH. We have for years published a Fair Housing legal column, authored by attorney Nadeen Green.
The vast majority of the people one meets in this industry are decent, hard-working professionals trying to earn an honest dollar. I personally know the president of 21st Mortgage, Tim Williams. I have met Kevin Clayton more than once, and have interviewed his father and the founder of the firm, Jim Clayton at length; perhaps more than anyone else in the company’s history. My impression is that these are bright, honest, successful people. Can they be tough? Let’s rephrase. Can you be successful in business in the U.S. today, and not be flinty eyed, as Marty Lavin so aptly put it?
Since there was no reply to our queries to them, it seems comical and hypocritical that The Seattle Times whines in their article about Warren Buffett or members of the Clayton Homes and related lending teams not wanting to answer their clearly loaded questions.
So I’ve concluded this analysis by saying that The Seattle Times/BuzzFeed duo have apparently once more attempted to attack Buffett’s Berkshire-Hathaway/Clayton Homes and related lending operations for reasons very much like equally flinty-eyed Marty Lavin suggested. Take on the biggest boy on the block. If you can make the big boys in MH fold, then the rest of the MH industry’s efforts to reform Dodd-Frank to the benefit of home owners, would-be buyers and industry firms would fold with them.
HR 650/S 682 – The Preserving Access to Manufactured Housing Act – is one of the more successful efforts to date at pushing needed reforms of Dodd-Frank. Might it pass the Senate in 2016? Our sources suggest that is possible. Would it sustain a presidential veto? That’s a tougher call.
But my hope is that any low-brow, pseudo-journalistic efforts to lay those seeking reforms of Dodd-Frank and the CFPB are as easy to poke holes in as Baker and Wagner’s work is, or as others before them who wrongfully attack or demean modern manufactured homes – such as the Daily Yonder.
The big clue that they have a hit piece here is subtle for those outside of the MH industry, but is found in Baker/Wagner’s opening statement. They called manufactured homes, “mobile homes.” There have been no mobile homes built in this nation since June 15, 1976. If they did their home work, then they surely know that they are misusing the terminology. So why do Baker and Wagner deliberately call manufactured homes (MH), “mobile homes”? Likely because they want to put the MH industry down, in spite of the fact that it is the solution to our nation’s affordable housing crisis, including a sure path to home ownership for millions of people from all economic and ethnic groups and walks of life. ##
Additional Resources and References in understanding MH Lending and Related Regulatory issues
For those who seek a comprehensive understanding of this issue, the following articles are provided for additional depth on this issue; which is vital to supporting improved access to America’s most quality and affordable housing option.
Renters Nation – the Dark Side of Dodd-Frank and Its Impact on Affordable Housing The headline summarizes it well, and the narrative is compelling, provided by an award-winning journalist.
Dodd-Frank and Manufactured Home Financing – the Place where Good Intentions and Unintended Consequences Collide This was the first article by award-winning, “depth consumer affairs” journalist Jan Hollingsworth on the topic of MH lending. The facts, charts and a home buyer’s stunning odyssey presented by Hollingsworth broke new ground in media coverage, aiding a better understanding of MH lending.
Manufactured Home Personal Property Loans – Are they Predatory? Are Dodd-Frank Regulations Helping or Harming MH Consumers and Home Owners?
thehill.com/blogs/congress-blog/economy-budget/248665-regulations-for-manufactured-home-loans – the article linked above has extensive cross links to additional sources that document the various statements.
https://manufacturedhomelivingnews.com/she-black-hes-white-theyre-in-different-parties-why-congressional-representatives-terri-sewell-and-andy-barr-support-preserving-access-to-manufactured-housing/ MH lending reforms has bi-partisan support, as the article demonstrates.
https://manufacturedhomelivingnews.com/cfed-and-cfpb-confused-conflicted-friends-of-manufactured-home-owners-and-prospective-buyers/ Part of the resistance to MH lending comes from a source that has a clear conflict of interest on this issue.
https://manufacturedhomelivingnews.com/congressman-stephen-fincher-is-demanding-fairness-for-rural-americans-in-manufactured-homes-the-hill-oped/ Congressman Fincher’s reason for sponsoring HR 650, the House bill that has already passed; pending the upcoming vote on S 682, the companion bill to HR 650 that is pending a vote in the U.S. Senate.
https://manufacturedhomelivingnews.com/sam-landy-umh-ceo-on-dodd-frank-and-the-preserving-access-to-manufactured-housing-act-s-682hr-650/ – This video interview and the related article confirms many of the assertions that finance expert and attorney Marty Lavin has made in the video above.
https://manufacturedhomelivingnews.com/impact-of-cfpb-loan-regulations-on-the-lowest-cost-manufactured-and-mobile-home-owners/ – this is the first video interview with an MH home owner, who wants to see her home’s values protected from the harmful impact of current CFPB regulations
http://www.MHProNews.com/home/industry-news/industry-in-focus/10381-doug-ryan-cfed-manufactured-housing-and-financing-whats-wrong-whats-right It seems unusual, but there are consumer focused organizations like CFED that are pro-manufactured housing, but who oppose manufactured housing lending; the video and column explore those issues. ###