MARYVILLE, Tenn., December 26, 2015 — Clayton Homes offers homes and financing to all Americans regardless of their race, socioeconomic status, or background. We categorically and adamantly deny discriminating against customers or team members based on race or ethnicity as Dan Wagner and Mike Baker insinuate in an article published by The Seattle Times and BuzzFeed. In fact, our company is committed to building on our track record of helping individuals and families from all walks of life, including people in historically underserved markets, achieve the American dream of home ownership.
Clayton Homes chose not to engage with Wagner and Baker given their demonstrated lack of interest in fairness as they have continued to pursue activism masquerading as journalism. We have served well over one million customers in providing housing and financing over the years. In the spirit of transparency, we are sharing here information backed by more representative data that should be helpful to anyone interested in our company and – in particular – Clayton Homes’ treatment of our customers and team members.
Committed to Serving Underserved Markets
The untold story is about families with very few housing and financing options. In 1998, more than 370,000 manufactured homes were produced and two dozen lenders were available. Last year, less than 65,000 homes were produced and only a handful of lenders remained. While others abandoned the market, Clayton Homes remained and weathered one of the worst housing and economic markets in history to become the largest producer of quality, affordable housing.
The real world challenges of underserved markets were made clear in a December 17, 2015 article from Indian Country Today Media Networks: “American Indians in the two states with Native populations of more than 10 percent continued to get a much lower percentage of mortgages than their representation in those states in 2014.” This story also notes that 21st Mortgage, which we own, was the third largest originator of loans to Native Americans.
In 2014, manufactured housing made up approximately 70% of American single family housing in the critical under $150,000 (Source: U.S. Census) market. Just this week, the Federal Housing Finance Agency (the regulator for Fannie Mae and Freddie Mac) issued its proposed rule concerning its duty to serve “underserved markets” including manufactured housing. Clayton Homes offers affordability. This year our average sales price for a new, three bedroom, 1,400 square foot home is $71,921. The average monthly payment is $548.98. Over the last three years, the average after-tax profit for each home sold was $746 at retail and $1,554 for each home built.
In this age of increasing government oversight, the lending and servicing practices of the two lending companies we own – 21st Mortgage and Vanderbilt Mortgage - are highly regulated by both state and federal agencies, including the U.S. Department of Housing and Urban Development, the Federal Trade Commission, and the Consumer Financial Protection Bureau. 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.
Lending to All Families
BuzzFeed and The Seattle Times refer to minority homebuyers as “unwitting” in their article. We think their mischaracterization of minority customers is degrading to these American families. Clayton is proud of our continued commitment to see that all families, including minority families, have access to our homes. We offer access to credit for a wider range of credit scores than most lenders. Sometimes this means that our share of the underserved markets may be greater than other lenders, but this statistic reflects our efforts to meet the housing needs of a wider swath of the public – something we take great pride in.
Of the loans we made for home purchases over the last three years, 14.1% were Hispanic, 10.6% were African American, 1.8% were Native American, and 63.1% were white. Contrary to the article’s allegations, we do not “target” minority markets or engage in “reverse-redlining.” Instead, while others either failed or exited the market, we kept access to affordable housing and credit available for all families, regardless of race or ethnicity.
Race and ethnicity are never considered in pricing or structuring our loans. Our policies, procedures, and training prohibit racial discrimination in our lending and servicing operations. 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.
Regardless of income amount or credit characteristics, we perform a rigorous underwriting process to determine that every borrower has the reasonable ability to repay the loan – including analysis and third-party verification of income and debts. We analyze residual income after payment of debts and customary living expenses (e.g., food, clothing, gas, medical costs). We seek to make sure that every borrower – regardless of race or ethnicity – can repay the loan. We do not want anyone to buy a home they cannot afford. When a loan repossesses, everyone loses. Because we hold nearly all of the loans we originated on our books, we share in that loss with the customer. This is why our servicing practices are geared toward keeping customers in their homes, and it works. Over the past 12 months, over 97% of customers have made their payments and many pay their loans off in full early.
Keeping Families in Homes
Our commitment to fairness extends to our servicing operations as well. We do not treat customers in a manner that is berating or racially insensitive, and we strenuously object to any suggestion to the contrary. Our policies, procedures, and training prohibit discrimination against our valued customers. The servicing teams are regularly trained on both the legal requirements and the fair and ethical treatment of customers – neither of which would permit the use of demeaning racial language of any kind. Calls by our account representatives are regularly monitored to ensure both compliance with legal requirements – including permitted contact with third parties like employers - and professional interactions with our customers. Our collections practices are designed to maintain a single point of contact with each customer so that our teams can develop a relationship with the customer and be in a better position to help.
We also support customers through a variety of loss mitigation options, including loan modifications, extensions, and a homeowner’s assistance program where we actually pay the customer’s monthly payments to help them through a tough time. In 2015 alone, we made $2.6 million in payments to help customers through financial difficulties – and the customers do not have to repay that assistance. While federal privacy laws prohibit us from sharing specifics of these accounts, our lenders did not originate any of the loans made to the Native American customers named in the article who claimed that racially insensitive remarks were made in the servicing of their loans. One account was actually repossessed by another lender before we became responsible for the loan. Additionally, multiple loss mitigation relief was provided to one customer to help them keep their home.
Support for Spanish-speaking Customers
Our lenders have Spanish-speaking personnel in both the originations and servicing departments to assist customers. We have procedures in place designed to get Spanish-speaking customers to a designated representative as quickly and efficiently as possible. In markets such as Texas, we have implemented procedures designed for interacting in Spanish. If the customer chooses to converse in Spanish, forms translated in both English and Spanish advise the customer that sales and lending documents will be in English, and that the customer needs the ability to read and understand the documents or provide an interpreter to assist them. At closing, we provide an acknowledgement to confirm the participation of the interpreter, if applicable.
Selecting the Right Lender
We want customers to select a lender that is right for their families. There are no financial incentives in our retail company for directing business to any particular lender. According to the 2014 HMDA data, our lenders originated 34.82% of all loans used to purchase manufactured homes. Of those originated loans, nearly 63% did not buy their home from a Clayton Homes retail store.
Our retail company maintains policies, procedures and training designed to give customers a choice of lenders. We have trained over 1,500 retail team members on these matters this year. We display information provided by lenders who have approved our retail locations on a lender board for the customer to review. We also work with local lenders in the market. We ask customers to select lenders on a lender choice form, and we encourage them to select more than one lender, so they can compare options to best fit their needs.
When compared with other lenders, we consistently offer a competitive and broader range of options. For example, in lending on Native American reservations, it is our experience that every national and regional lender does not offer all loan products on reservation property. In contrast, our lenders offer home only loan products to Native American borrowers on and off reservation property. So, it is possible in a particular market that one of our lenders is the customer’s only choice if they want a certain type of home – home-only purchased without land for example – placed in a reservation. With respect to the Native American lender referenced in the article, in recent discussions, the Navajo Nation’s Credit Services department advised that they prefer not to be listed on our lender board, since they are only available to members of the Navajo Nation.
Our Valued Team Members
We know that our company’s greatest strength is our 13,200 team members. In a recent survey of our retail company, 85% stated that they were extremely satisfied working for the company, and that they would recommend the company to friends as a great place to work. We are adamant that discrimination against our team members is not and will not be tolerated. Privacy laws prohibit us from sharing the specific details of the former employees mentioned in the article, but those isolated allegations – often by individuals who were reprimanded or terminated for performance issues – are not reflective of our company, our team members, or our working environment. The article references team members who brought claims against the company. All but one were either dismissed in court or the EEOC determined that their allegations were not sufficient to establish a violation of applicable law.
We provide equal employment and advancement opportunities for all individuals regardless of race or any other characteristics that are protected by law. Our policies and training reflect this commitment, and we maintain clear avenues where team members can report any issues, including managers, human resource professionals and an anonymous call-in hotline.
To read more about Clayton Homes, visit our About Us page.
About Clayton Homes
Clayton Homes was founded in 1956 and is proud of its history of providing affordable, quality homes. The Company is a diverse builder offering traditional site-built homes, modular homes, manufactured housing, “tiny” homes, college dormitories, military barracks, and apartments. In 2015, Clayton built over 34,000 homes.