OMAHA, Neb. (Reuters) - Billionaire investor Warren Buffett on Saturday defended his Clayton Homes unit against accusations that the manufactured home seller had preyed on lower-income purchasers with its lending practices.
"I make no apologies whatsoever about Clayton's lending terms," said Buffett, speaking at the annual meeting of his sprawling Berkshire Hathaway Inc conglomerate. The meeting was expected to draw upwards of 40,000 people.
The Seattle Times and the Center for Public Integrity in April published a report suggesting that Clayton Homes traps buyers with high interest rates, leaving them with unaffordable loans on depreciating homes.
But Buffett said that because many of Clayton's buyers posed higher risks, charging them higher interest rates was justified.
"It's true that manufactured housing hits the lower end of the market," he said. The main question is whether a company can make sensible loans to people so that they can continue making those payments and keep their houses, Buffett added. In that regard, Clayton has been "exemplary," he said.
It is equally important, said Buffett, that Clayton shared the risk with buyers because the manufactured home maker and finance company keeps ownership of the loans it originates.
"If we make a mistake, it hurts them and it hurts us, and that is a very unusual arrangement in the financial industry."
He listed the main causes of default as job loss, divorce and death.
"That happens with high-priced houses as well," he said. "It happens more often with people who are living closer to the edge, but I don't think that's a reason to deny them a house."
Clayton is one of more than 80 companies owned by Berkshire Hathaway, which also counts Geico insurance, Dairy Queen and the BNSF railroad among its holdings.