After a joint investigation by the Center and The Seattle Times, Warren Buffett was called before Berkshire Hathaway shareholders and national media in the spring to explain the lending practices of Clayton Homes, the nation’s largest mobile home manufacturer and lender.
Editors Note: This story is part of joint investigation between the The Center for Public Integrity and The Seattle Times
OMAHA, Neb. — Warren Buffett opened his shareholder meeting Saturday with a vigorous defense of the mobile-home business that he’s helped build into the industry’s most dominant player.
Clayton Homes was the subject of a recent investigation by The Center for Public Integrity and The Seattle Times, which documented how the company has used predatory sales practices, exorbitant fees and home-loan interest rates that can exceed 15 percent. Because Clayton’s mobile homes often dwindle in value, borrowers find themselves trapped, unable to sell or refinance due to the punishing lending terms.
The first question Buffett faced at his annual meeting came from a longtime shareholder in Texas who said he was having “heartburn” about issues raised in the story. The shareholder said he previously viewed Berkshire Hathaway as “an ethical company” but was concerned about Clayton and the company’s weak response to the Center for Public Integrity/Seattle Times.
Buffett responded that the company has been exemplary in providing loans to people who often have poor credit. He said the company has no interest in providing loans that fail, since the company holds the loans on its books.
“I make no apologies whatsoever about Clayton’s lending terms,” Buffett told the crowd of 40,000 that gathered in Omaha.
Most Clayton mobile-home loans are considered “higher-priced” under federal guidelines, and those loans averaged 7 percentage points higher than a typical home loan in 2013, compared with just 3.8 percentage points for other industry lenders, according to an analysis of federal data.