Daily Archives: April 5, 2015

Warren Buffett’s mobile home empire preys on the poor

Billionaire profits at every step, from building to selling to high cost lending

Editor’s note: This is a joint investigation of The Center for Public Integrity and The Seattle Times.

Denise Pitts walked into the pawn shop not far from where she bought her mobile home in Knoxville, Tennessee, and offered up her wedding rings for $100. Her marriage wasn’t over, but her husband was battling cancer and, Pitts said, her mortgage company told her the only way to keep a roof over his head would be to sell everything else.

Across the country in Ephrata, Washington, Kirk and Patricia Ackley sat down to close on a new mobile home, only to learn that the annual interest on their loan would be 12.5 percent rather than the 7 percent they said they had been promised. They went ahead because they had spent $11,000, most of their savings, to dig a foundation.

And near Bug Tussle, Alabama, Carol Carroll has been paying down her home for more than a decade but still owes nearly 90 percent of the sale price — and more than twice what the home is worth.

The families’ dealers and lenders went by different names — Luv Homes, Clayton Homes, Vanderbilt, 21st Mortgage. Yet the disastrous loans that threaten them with homelessness or the loss of family land stem from a single company: Clayton Homes, the nation’s biggest homebuilder, which is controlled by its second-richest man — Warren Buffett.

Buffett’s mobile home empire promises low-income Americans the dream of homeownership. But Clayton relies on predatory sales practices, exorbitant fees, and interest rates that can exceed 15 percent, trapping many buyers in loans they can’t afford and in homes that are almost impossible to sell or refinance, an investigation by The Center for Public Integrity and The Seattle Times has found.

Read on.

Bank of America accused of ‘tarnishing’ Merrill Lynch

Merrill Lynch’s Thundering Herd is having a huge crisis of confidence.

Bank of America’s integration of the prized brokerage empire is spooking many Merrill financial advisers, who are balking at CEO Brian Moynihan’s arm-twisting, corporate culture, people familiar with the company say.

The Charlotte, NC, bank’s efforts to wring profits from its Merrill unit is turning off many of the Herd’s professionals, Merrill advisers said, privately complaining that BofA’s persistent push to cross-sell banking and brokerage products is the problem.

Former advisers and industry insiders accuse BofA of tarnishing the proud Merrill brand.

The other part, ex-Merrill pros say, is a military-style management approach with an emphasis on millionaire households — a far cry from the old entrepreneurial spirit that energized Merrill before then-CEO Ken Lewis acquired it. (Merrill’s then-CEO John Thain had shopped himself to every bank over a fateful weekend during the ’08 financial crisis.)

Samuel Spanos spent 34 years as a Merrill Lynch broker. He recently quit to take his large team to Raymond James in Beaver, Pa., saying Merrill was never the same after the takeover.

Read on.