Warren Buffett owns lots of companies through his investment vehicle subsidiary Berkshire Hathaway. X will give Buffett credit, he does give out very good investment advice such as; taking a long view on the market as opposed to trying to time it, and buying a wonderful company at a good price instead of buying a good company at a wonderful price. Turn on CNBC or Fox Business and the program’s host will probably mention Buffett several times throughout the day. He is known as both the “oracle of Omaha” and the “greatest investor ever.” For the most part this is true; however, let’s delve into a few select companies he owns and how they fleece the poorest people living in our country.
One such company is Clayton Homes. Berkshire Hathaway (Buffett) acquired them back in 2003 for 1.7 billion dollars. Clayton Homes builds and sells manufactured homes. X has no issue and actually believes Buffett made a smart decision to buy a company like Clayton. Manufactured homes are generally lived in by people who do not have much financially and that is not an issue; people do need to live somewhere. Clayton sells its products on sales lots similar to an independent car dealer. Typically, when customers visit Clayton’s lots, they encounter flashy signs and banners specifically to target their preferred demographic, the poor, and minorities. (More on this later).
Clayton was expanded over the years to produce many varieties of the same types of homes under different names, smart move as automakers do the same thing. Many towns have multiple Clayton Homes dealers but they were intentionally branded under different names to deceive shoppers. In some sparsely populated parts of the Midwest and South, one would have to drive past as many as five Clayton Homes dealers to find a non-Clayton dealer. In Texas, there are 12 Clayton dealers and not one competitor for over three hours away! In Carrolton, Texas—just north of Dallas, Buffet’s Clayton Homes controls 90% of the manufactured home market, yeah think about that for a minute.
Manufactured home selling isn’t unethical or anything so, why is X white hot at Rich Uncle Pennybags? It’s the way he markets, insures, and finances them. Clayton markets directly to the poor, but more so to minorities. One former Clayton supervisor said “We market to that demographic because they are not as smart as whites and don’t ask questions like whites do.” That’s not racist at all is it? Manufactured homes are a horrible investment to begin with because they depreciate in value extremely quickly, and if you don’t have the $45k to buy the unit outright then Buffett can finance it for you! Yup, he owns Vanderbilt Mortgage, a low income, high risk lender. Vanderbilt was the preferred lender for Clayton sales associates to steer their unexpected customers toward at financing time. Vanderbilt paid Clayton a royalty for each placed loan, and Buffett got a cut as well. (Kinda sounds like the Wells Fargo debacle right?) Vanderbilt charges very high fees, and the interest rates are exorbitant, often seven points higher than a typical home loan. So in today’s terms that would be around 11% interest a year. Other lenders charged around 3.8% higher than a conventional home loan, but remember Uncle Warren wants to get paid at every point of the process. Vanderbilt Mortgage has a staggering 40% of the manufactured home loan market, the second largest controls just 6%, that would be Wells Fargo.
Additionally Clayton has an insurance subsidiary, HomeFirst Agency. They were the preferred provider of insurance on all the homes sold by Clayton and financed by Vanderbilt. Again, the sales associates were telling customers that their current insurance company does not insure mobile homes so you should go with our in house option. So once again he duped unsuspecting people. So at this point of the sales process Buffett has profited several different times: the loan Clayton got from Berkshire to build the unit, Shaw Carpet and Benjamin Moore Paints to finish the interior (both owned by Buffett), the loan through Vanderbilt Mortgage, and the insurance through HomeFirst. Sounds like a heck of a gig if you can land it. However of the three main players in this article, Vanderbilt Mortgage literally may be the devil re-incarnated.
Vanderbilt doesn’t verify or ask for income statements from the individual getting the loan. This happened on purpose folks, Vanderbilt does this to make a profit up front on the fees and interest for the first few months, then they could repossess the unit and sell it again; lather, rinse, repeat. Or in the words of the Blogfather, Dewey, Screwem and Howe. Vanderbilt would tell the customers the loans could be refinanced at a lower rate in the future; not true, Vanderbilt did this so they could repossess. Vanderbilt customer service members would tell clients that called in pleading to refinance that they should and I quote “not buy medication or medicines, and encourage them to pawn off or sell any items they could to make that payment.” The customers could not refinance the loans as units depreciate extremely quickly. As a result, many customers lost their homes. Even worse, many customers lost their land which they had put up as collateral. In one case, while foreclosure was being introduced, Vanderbilt had already taken the unit and had it listed for sale on a Clayton lot again. These companies are so corrupt and unethical they defied the orders of a judge.
So once again to recap, the nice guy Warren Buffett who laments that his secretary pays a higher income tax rate then he does, owns companies that allow him to profit at every turn and plays by his own set of rules when it comes to steering customers into making poor financial decisions. Buffett is a fraud, plain and simple. He is a very greedy human being who is ruthless to the working people while he profits hand over fist. He should not be regarded as a great person or great investor, as in these cases with Vanderbilt Mortgage and Clayton Homes some people and families literally lost everything to a phony empire know as Warren Buffett. Wait until I unveil the next hit on him, regarding his profits over employee’s dealings.
Until next time,