[Federal Register Volume 71, Number 114 (Wednesday, June 14, 2006)]
[Proposed Rules]
[Pages 34464-34473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5390]



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Part IV





Department of Housing and Urban Development





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24 CFR Part 3282



Manufactured Housing Consensus Committee--Rejection of Subpart I 
Proposal; Proposed Rule

  Federal Register / Vol. 71, No. 114 / Wednesday, June 14, 2006 / 
Proposed Rules  

[[Page 34464]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 3282

[Docket No. FR-5072-N-01]


Manufactured Housing Consensus Committee--Rejection of Subpart I 
Proposal

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice of rejection of Manufactured Housing Consensus Committee 
recommendation of proposed regulation.

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SUMMARY: The Manufactured Housing Consensus Committee (MHCC) has 
submitted to HUD recommended regulatory text that would revise HUD's 
current Subpart I regulations that implement statutory requirements 
concerning how manufacturers and others address reports of problems 
with manufactured homes, including notifications to consumers and 
correction of safety defects and of homes that fail to meet the Federal 
construction and safety standards. The National Manufactured Housing 
Construction and Safety Standards Act of 1974 expressly limits HUD to 
either accepting such an MHCC recommendation in its entirety for 
publication as a proposed rule, or rejecting the recommendation, 
providing the MHCC a written explanation of the reasons for rejection, 
and publishing in the Federal Register the rejected proposal, the 
reasons for rejection, and any recommended modifications. The Secretary 
commends the careful work of the MHCC on this initiative and would 
accept almost all of the MHCC's recommendation. HUD has met with the 
MHCC numerous times on these regulations, and the Department and the 
MHCC have worked together to draft a clear and comprehensive revision 
of these regulations. However, because HUD believes that certain 
language included in the MHCC recommendation is contrary to the 
statute, HUD cannot accept the proposal. Nevertheless, in accordance 
with a different statutory procedure that is available, and in an 
effort to resolve the remaining differences between what HUD could 
accept and what was included in the MHCC recommendation, HUD has also 
submitted to the MHCC for its review a HUD proposal for revision of 
subpart I that is based on the MHCC recommendation, with a few 
modifications as discussed in this notice.
    As required by the statute, the full text of the MHCC's 
recommendation is set forth in this notice for informational purposes, 
along with HUD's reasons for not accepting all of the recommendations 
and an explanation of the modifications HUD has suggested to the MHCC. 
A set of principles that the MHCC drafted to guide its development of 
its recommendation is also set out in this notice. In accordance with 
statutory procedure, after HUD has received the MHCC's comments on 
HUD's proposal to revise Subpart I and HUD has considered those 
comments, HUD expects to publish separately a proposed rule revising 
Subpart I for public comment.

FOR FURTHER INFORMATION CONTACT: William W. Matchneer III, Associate 
Deputy Assistant Secretary for Regulatory Affairs, Office of Regulatory 
Affairs and Manufactured Housing, Room 9164, Department of Housing and 
Urban Development, 451 Seventh Street, SW., Washington, DC 20410; 
telephone (202) 708-6401 (this is not a toll free number). Persons with 
hearing or speech impairments may access this number via TTY by calling 
the toll-free Federal Information Relay Service at 800-877-8389.

SUPPLEMENTARY INFORMATION: The Manufactured Housing Consensus Committee 
(MHCC) was established by the National Manufactured Housing 
Construction and Safety Standards Act of 1974, 42 U.S.C. 5401-5426 (the 
Act), for the purpose of providing periodic recommendations to the 
Secretary to adopt, revise, and interpret the Federal manufactured 
housing construction and safety standards and the procedural and 
enforcement regulations. 42 U.S.C. 5403(a)(3)(A). The MHCC may submit 
to the Secretary proposed procedural and enforcement regulations and 
recommendations for the revision of the regulations. 42 U.S.C. 
5403(b)(1). To be promulgated by the Department, the regulations and 
revisions recommended by the MHCC must be consistent with the Act.
    When the Secretary receives a proposed procedural or enforcement 
regulation from the MHCC, the Secretary must either approve the 
proposal with no modification or reject the proposal. If the Secretary 
rejects the proposal, HUD must provide to the MHCC a written 
explanation of the reasons for rejection and publish the proposal, the 
reasons for rejection, and recommended modifications in the Federal 
Register. 42 U.S.C. 5403(b)(4).
    The MHCC has transmitted to the Secretary a recommendation dated 
June 3, 2005 (Recommendation), that the Manufactured Housing Home 
Procedural and Enforcement Regulations, 24 CFR part 3282, be amended by 
revising Subpart I, Consumer Complaint Handling and Remedial Actions 
(24 CFR 3282.401-3282.416) (Subpart I). The Recommendation is the 
product of extensive work of the MHCC over a period of several months, 
through 20 lengthy meetings that have involved producers and a retailer 
of manufactured housing, consumers, administrators of State 
manufactured housing programs, other interested parties, and HUD. 
During those discussions, HUD advised the MHCC members, orally and in 
writing, of concerns that HUD would have with certain language under 
consideration by the MHCC and the reasons for those concerns. The MHCC 
addressed some, but not all, of those concerns in its final 
Recommendation.
    Subsequent to the submission of the Recommendation, there have been 
7 additional meetings of the MHCC and HUD to discuss the MHCC 
Recommendation and revisions that HUD had suggested. Agreement was 
reached on some further changes suggested by HUD or members of the MHCC 
during those meetings, and those changes will be included in the 
proposed rule that HUD expects to publish later. In the end the MHCC 
declined, however, to revise its Recommendation in a manner that would 
allow HUD to accept it, unchanged, for publication as a proposed rule.
    While HUD agrees with a great majority of the MHCC Recommendation, 
HUD continues to believe that some of the language in the 
Recommendation is not consistent with the Act and that a few 
modifications of the language are needed. Therefore, because HUD cannot 
accept the entire Recommendation, HUD must reject the entire 
Recommendation. HUD is following the procedure established in section 
604(b)(4) of the Act (42 U.S.C. 5403(b)(4)), under which, upon 
rejection, the Secretary must publish notice of the Recommendation in 
the Federal Register, along with modifications that HUD would suggest.
    The Secretary appreciates the dedication and care that the MHCC 
members have shown in their consideration of the changes suggested for 
subpart I, and expects to move forward under the separate procedure to 
publish a proposed rule for public comment that embraces a great 
majority of the revised subpart I language included in the 
Recommendation. The proposed rule that HUD has presented

[[Page 34465]]

to the MHCC for its consideration under the procedures in section 
604(b)(3) of the Act (42 U.S.C. 4503(b)(3)) uses the MHCC 
Recommendation as its base, but also includes the modifications that 
are discussed in this notice.

Areas To Be Modified

    HUD is setting out in this section of the notice its reasons for 
the rejection of the Recommendation and the modifications that HUD has 
suggested to the MHCC.

Reasons for Rejection: Requirements Not Consistent With Statutory 
Authority

    (Sec. Sec.  3282.404(b)(3), 3282.405(a)(2), 3282.415(c), and 
3282.415(d) in Recommendation). In section 615 of the Act (42 U.S.C. 
5414), Congress placed responsibility for the notification and 
correction of defects in manufactured homes on manufacturers, and set 
guidelines for manufacturers to meet these responsibilities. Section 
613 of the Act (42 U.S.C. 5412) imposes additional repair and 
repurchase requirements on manufacturers. The MHCC has recommended some 
revisions of the Subpart I requirements that are not consistent with 
the responsibilities established by Congress when it granted preemption 
for the Federal standards that apply to the construction of 
manufactured homes.
    The MHCC has recommended limiting the responsibility for furnishing 
notification to homeowners about safety hazards and failures to comply 
with the Federal standards, which Congress expressly placed on 
manufacturers under section 615(a) of the Act (42 U.S.C. 5414(a)). 
Under the MHCC Recommendation, in some of these instances consumers 
would not receive notification of problems in their home. HUD would 
modify the language in Sec. Sec.  3282.404(b)(3) and 3282.405(a)(2) of 
the Recommendation to eliminate phrases that limit a manufacturer's 
notification responsibilities to only those problems that are caused by 
persons working on behalf of a manufacturer. Consistent with the Act 
HUD would continue, however, to limit the manufacturer's correction 
responsibilities to only those defects that are related to errors in 
design or assembly of the home by the manufacturer, in accordance with 
section 615(g) (42 U.S.C. 5414(g)).
    HUD has a similar concern about language limiting the 
manufacturer's responsibility under section 613 of the Act (42 U.S.C. 
5412) for correcting noncompliances, defects, serious defects, and 
imminent safety hazards in homes delivered to retailers and 
distributors before those homes are sold to purchasers, and about 
language establishing new responsibilities for retailers and 
distributors that are not found in the Act. HUD would modify Sec.  
3282.415(c) of the MHCC Recommendation by eliminating phrases that 
would limit the manufacturers' pre-sale correction responsibilities and 
could require HUD and State regulators to meet new burdens of proof in 
assuring production of manufactured homes that comply with the Federal 
construction and safety standards. HUD also would delete Sec.  
3282.415(d) as being inconsistent with sections 613 and 623(c)(12) of 
the Act (42 U.S.C. 5412 and 5422 (c)(12)).
    Other suggested modifications: determination factors (Sec.  
3282.404(c)(2)(iii)). In the proposed rule that HUD has submitted to 
the MHCC for prepublication review, HUD also included a few other 
modifications to the Recommendation, even though HUD does not base its 
rejection of the MHCC Recommendation on these modifications.
    HUD believes that it is important for manufacturers to use 
appropriate methods for determining which manufactured homes should be 
included in a class of homes for which notification or correction of 
defects or safety hazards is required. Currently, Sec.  3282.409(c) of 
HUD's regulations recognizes a methodology that includes inspection of 
the actual homes, not the records of those homes. The MHCC 
Recommendation would revise the current provision by permitting 
inspection of the records, including consumer and retailer complaints, 
rather than the homes. HUD would modify that permissive language to 
make it clear that the methodology would only be acceptable if the 
cause of the problem is such that it would be understood and reported 
by consumers or retailers. For example, inadequate firestopping in a 
home is not a condition that a homeowner, or even a retailer, can be 
expected to observe and report. Therefore, a manufacturer who is 
determining the scope of a class of homes with inadequate firestopping 
should not be permitted to rely on complaint records alone to identify 
the homes to be included in the class.
    Other suggested modifications: recordkeeping. HUD would also add 
language in the recordkeeping requirements in Sec.  3282.417 that would 
provide options for how to comply with the requirements and would avoid 
using an undefined term. These modifications would establish a brighter 
line for how manufacturer records are to be maintained. The new 
provisions would also recognize a manufacturer's right to keep some of 
these records in a central class determination file that might be 
preferred by some manufacturers and would reduce the amount of 
paperwork required. HUD would add such an alternative because some 
manufacturers are already keeping their records in this alternative 
format, which is a format that also could be more user-friendly for HUD 
and State regulators in enforcing the law.
    Other suggested modifications: generally. HUD would reorganize 
Sec. Sec.  3282.411 and 3282.412 of the MHCC Recommendation, to assure 
these provisions are internally consistent. The general structure of 
the MHCC Recommendation would be retained, however. Section 3282.411 of 
the Recommendation establishes the prerequisites for any SAA to refer 
information to the appropriate SAA or HUD for possible investigation. 
Section 3282.412 sets forth requirements for HUD or an appropriate SAA 
to initiate a formal administrative investigation process. The 
revisions HUD would make in these sections of the Recommendation would 
be technical changes to simplify and clarify the provisions and to 
avoid overlap within the two sections.
    HUD also would add a requirement in Sec.  3282.404(a) that, when a 
manufacturer makes an initial determination of a serious defect or 
imminent safety hazard, the manufacturer must notify HUD, the 
appropriate SAA, and the manufacturer's IPIA of the determination. The 
purpose of this requirement would be to provide advance notice of a 
potentially serious problem during the time the manufacturer is 
required to develop a full plan of notification and correction 
regarding the problem. HUD would consider this modification to be 
appropriate in light of the MHCC's Recommendation that would extend the 
time a manufacturer has to complete its plan beyond what is permitted 
under the existing regulations.
    Finally, HUD included clarifying and nonsubstantive, editorial 
changes in the modified version of the Recommendation that HUD 
submitted to the MHCC for its prepublication review. These changes 
would be minor and would be for the purpose of making the intent of the 
applicable provision more clear.

Principles Guiding MHCC Subcommittee

    The following principles were adopted by the MHCC subcommittee that 
was charged with developing a draft revision of subpart I for full 
committee consideration, and are

[[Page 34466]]

included in this notice to provide additional context for the MHCC's 
efforts on this difficult undertaking:
    (1) Subpart I regulations should clearly identify, especially to 
the homeowner, what problems manufacturers will correct. At a minimum, 
problems currently being corrected will continue to be corrected.
    (2) Subpart I should hold the manufacturer accountable for all 
construction to comply with the Federal manufactured home construction 
and safety standards.
    (3) If a person is contractually obligated to provide a service or 
extend a warranty for work that is the manufacturer's responsibility, 
subpart I regulations would not preclude fulfillment of that obligation 
or warranty.
    (4) Subpart I regulations should clearly define when a manufacturer 
has a duty to investigate and how the investigation should be 
performed.
    (5) Subpart I should describe methods available to conduct an 
investigation and indicate the investigation methods may vary based on 
the circumstances surrounding the problem.
    (6) Subpart I regulations should hold the manufacturer accountable 
for choosing the most appropriate method of investigation based on the 
known facts concerning the problem.
    (7) Subpart I regulations should support the manufacturer's 
findings and subsequent course of action when a manufacturer has 
conducted in good faith an appropriate investigation based on the facts 
available and taken appropriate action. If additional information is 
presented, then a new investigation may be necessary. SAAs and HUD 
oversight may be conducted as necessary.
    (8) Subpart I regulations should require manufacturers to utilize 
service records and approved designs as part of the investigative 
process.
    (9) Subpart I regulations should clearly identify who is 
accountable for problems occurring to sections of homes that are in 
transit, in storage or at retail sales centers.
    (10) Subpart I regulations should not hold the manufacturer 
responsible for normal wear and aging, unforeseeable consumer abuse or 
neglect of proper maintenance. The regulations need to indicate how old 
the manufactured home needs to be before these factors could be 
considered the primary cause of the problem. The life of the product 
warranty may be considered for time limits.
    (11) The manufacturer's responsibility for construction should be 
separate and distinct from any manufacturer responsibility for 
installation.
    (12) Subpart I regulations should utilize consistent wording and be 
in conformance with the Act as amended by the MHIA 2000.
    (13) Subpart I regulations should place a priority on correcting 
the problem while maintaining requirements for sufficient documentation 
to identify patterns in construction problems.
    (14) HUD cannot exceed its statutory authority and must implement 
all of the requirements of the Act.
    (15) For each recommendation, the MHCC will consider the factors in 
section 604(e) of the Act and any other statutory guidance.
    (16) The recommendations for notification and correction should be 
consistent with the requirements of sections 602 and 615 of the Act.

Text of MHCC Proposal

    The text of the rejected proposal submitted by the MHCC is 
published as Appendix A.

    Dated: May 23, 2006.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal Housing Commissioner.

Appendix A--Text of Rejected MHCC Recommendation to Amend Subpart I of 
24 CFR Part 3282

Subpart A: Changes in Definitions:

Sec.  3282.7 (j): Text with proposed modification:

    Defect means, for purposes of this part, a failure to comply 
with an applicable Federal manufactured home safety and construction 
standard including any defect in the performance, construction, 
components or material that renders the manufactured home or any 
part thereof not fit for the ordinary use for which it was intended, 
but does not result in an unreasonable risk of injury or death to 
occupants of the affected manufactured home.

Sec.  3282.7 (v): Text with proposed modification:

    Manufactured Home Construction means all activities relating to 
the assembly and manufacture of a manufactured home including, but 
not limited to, those relating to durability, quality, and safety, 
but does not include those activities regulated under the 
installation standards in this chapter.

Sec.  3282.7 (dd) (NEW): Proposed New Text:

    Manufactured Home installation standards means reasonable 
specifications for the installation of a manufactured home, at the 
place of occupancy, to ensure the proper siting, the joining of all 
sections of the home, and the installation of stabilization, support 
or anchoring systems.

Subpart H, Sec.  3282.362(c)(1):

    Add the following new 11th sentence, before the sentence 
``Failure to perform to the approved manual justifies withholding 
labels until an adequate level of performance is attained.''
    ``The IPIA must periodically review the manufacturer's service 
records for determinations under Sec.  3282.404 to see whether 
evidence exists that the manufacturer is ignoring or not performing 
under its approved quality assurance manual, and, if such evidence 
is found, must advise the manufacturer so that appropriate action 
may be taken under Sec.  3282.404.''

Subpart I

Table of Contents:

Sec.  3282.401 Purpose and scope
Sec.  3282.402 General provisions
Sec.  3282.403 Consumer complaint and information referral
Sec.  3282.404 Determinations and concurrences
Sec.  3282.405 Notification pursuant to manufacturer's determination
Sec.  3282.406 Required manufacturer correction
Sec.  3282.407 Voluntary compliance with the notification and 
correction requirements under the Act
Sec.  3282.408 Plan of notification required
Sec.  3282.409 Contents of plan
Sec.  3282.410 Implementation of plan
Sec.  3282.411 Administrative initiation of remedial action
Sec.  3282.412 Preliminary and final administrative determinations
Sec.  3282.413 Implementation of Final Determination
Sec.  3282.414 Replacement or repurchase after sale to purchaser
Sec.  3282.415 Correction of homes before sale to purchaser
Sec.  3282.416 Oversight of notification and correction activities
Sec.  3282.417 Recordkeeping
Sec.  3282.418 Factors for appropriateness and amount of civil 
penalties

Sec.  3282.401 Purpose and scope.

    (a) Purpose. The purpose of this subpart is to establish a 
system of protections provided by the Act with respect to imminent 
safety hazards and violations of the construction and safety 
standards with a minimum of formality and delay, while protecting 
the rights of all parties.
    (b) Scope. This subpart sets out the procedures to be followed 
by manufacturers, retailers, State Administrative Agencies, primary 
inspection agencies, and the Secretary to assure that notification 
and correction are provided with respect to manufactured homes when 
required under this subpart. Notification and correction may be 
required with respect to manufactured homes that have been sold or 
otherwise released by the manufacturer to another party.

Sec.  3282.402 General provisions.

    (a) Purchaser's rights. Nothing in this subpart shall limit the 
rights of the purchaser under any contract or applicable law.
    (b) Manufacturer's liability limited. A manufacturer is not 
responsible for failures that occur in any manufactured home or 
component as the result of normal wear and

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aging, unforeseeable consumer abuse, or unreasonable neglect of 
maintenance. The life of a component warranty may be one of the 
indicators used to establish normal wear and aging. A failure of any 
component may not be attributed by the manufacturer to normal wear 
and aging under this subpart during the term of any applicable 
warranty provided by the original manufacturer of the affected 
component.

Sec.  3282.403 Consumer complaint and information referral.

    (a) Retailer responsibilities. When a retailer receives a 
consumer complaint or other information about a home in its 
possession, or that it has sold or leased, that likely indicates a 
noncompliance, defect, serious defect, or imminent safety hazard, 
the retailer must forward the complaint or information to the 
manufacturer of the manufactured home in question as early as 
possible in accordance with Sec.  3282.256.
    (b) SAA and HUD responsibilities. (1) When an SAA or the 
Secretary receives a consumer complaint or other information that 
likely indicates a noncompliance, defect, serious defect, or 
imminent safety hazard in a manufactured home, the SAA or HUD must:
    (i) Forward the complaint or information to the manufacturer of 
the home in question as early as possible; and
    (ii) Send a copy of the complaint or other information to the 
SAA of the State where the manufactured home was manufactured or to 
the Secretary if there is no such SAA.
    (2) When it appears from the complaint or other information that 
an imminent safety hazard or serious defect may be involved, the SAA 
of the State where the home was manufactured must also send a copy 
of the complaint or other information to the Secretary.
    (c) Manufacturer responsibilities. Whenever the manufacturer 
receives information from any source that the manufacturer believes 
in good faith relates to a noncompliance, defect, serious defect, or 
imminent safety hazard in any of its manufactured homes, the 
manufacturer must, for each such occurrence, make the determinations 
required by Sec.  3282.404.

Sec.  3282.404 Manufacturers' determinations and related concurrences.

    (a) Initial determination. (1) Not later than 30 days after a 
manufacturer receives information that it believes in good faith 
likely indicates a noncompliance, defect, serious defect, or 
imminent safety hazard, the manufacturer must make a specific 
initial determination that there is a noncompliance, a defect, a 
serious defect, an imminent safety hazard, or that the information 
requires no further action under subpart I. When no further action 
under subpart I is required and a problem still exists, the 
manufacturer must forward the information in its possession to the 
appropriate retailer and, if known, the installer, for their 
consideration.
    (2) In making the determination of noncompliance, defect, 
serious defect, imminent safety hazard, or that no further action is 
required under subpart I, the manufacturer must review the 
information it received and carry out reasonable investigations, 
including, if appropriate, inspections. The manufacturer must review 
the information, the known facts, and the circumstances relating to 
the complaint or information, including service records, approved 
designs, and audit findings, as applicable, to decide what 
investigations are reasonable.
    (b) Class determination. (1) When the manufacturer makes an 
initial determination of defect, serious defect, or imminent safety 
hazard, the manufacturer must also make a good faith determination 
of the class that includes each manufactured home in which the same 
defect, serious defect, or imminent safety hazard exists or likely 
exists. Multiple occurrences of defects may be considered the same 
defect if they have the same cause, are related to a specific 
workstation description, or are related to the same failure to 
follow the manufacturer's approved quality assurance manual. Good 
faith may be used as a defense to the imposition of a penalty, but 
does not relieve the manufacturer of its responsibilities for 
notification or correction under this subpart I. The manufacturer 
must make this class determination not later than 20 days after 
making a determination of defect, serious defect, or imminent safety 
hazard.
    (2) Paragraph (c) of this section sets out methods for a 
manufacturer to use in determining the class of manufactured homes. 
If the manufacturer can identify the precise manufactured homes 
affected by the defect, serious defect, or imminent safety hazard, 
the class of manufactured homes may include only those manufactured 
homes actually affected by the same defect, serious defect, or 
imminent safety hazard. The manufacturer is also permitted to 
exclude from the class those manufactured homes for which the 
manufacturer has information that indicates the homes were not 
affected by the same cause. If it is not possible to identify the 
precise manufactured homes affected, the class must include every 
manufactured home in the group of homes that is identifiable because 
the same defect, serious defect, or imminent safety hazard exists or 
likely exists in some homes in that group of manufactured homes.
    (3) For purposes related to this section, a defect, a serious 
defect, or an imminent safety hazard likely exists in a manufactured 
home if the cause of the defect, serious defect, or imminent safety 
hazard is such that the same defect, serious defect, or imminent 
safety hazard would likely have been introduced systematically into 
more than one manufactured home by the manufacturer, including a 
person performing work or providing a component on behalf of the 
manufacturer. Indications that the defect, serious defect, or 
imminent safety hazard would likely have been introduced 
systematically may include, but are not limited to, complaints that 
can be traced to the same faulty design, problems known to exist in 
supplies of components or parts, information related to the 
performance of a particular employee or use of a particular process, 
and information signaling a failure to follow quality control 
procedures with respect to a particular aspect of the manufactured 
home.
    (4) If under this paragraph (b) the manufacturer must determine 
the class of homes, the manufacturer must obtain from the IPIA, and 
the IPIA must provide, either:
    (i) The IPIA's written concurrence on the methods used by the 
manufacturer to identify the homes that should be included in the 
class of homes; or
    (ii) The IPIA's written statement explaining why it believes the 
manufacturer's methods for determining the class of homes were 
inappropriate or inadequate.
    (c) Methods for determining class. (1) In making a class 
determination under paragraph (b) of this section, a manufacturer is 
responsible for carrying out reasonable investigations. In carrying 
out reasonable investigations, the manufacturer must review the 
information, the known facts, and the relevant circumstances, and 
generally must establish the cause of the defect, serious defect, or 
imminent safety hazard. Based on the results of such investigations 
and all information received, the manufacturer must use an 
appropriate method or appropriate methods to determine the class of 
manufactured homes in which the same defect, serious defect, or 
imminent safety hazard exists or likely exists.
    (2) Methods that may be used in determining the class of 
manufactured homes include, but are not limited to:
    (i) Inspection of the manufactured home in question, including 
its design, to determine whether the defect, serious defect, or 
imminent safety hazard resulted from the design itself;
    (ii) Physical inspection of manufactured homes of the same 
design or construction, as appropriate, that were produced before 
and after a home in question;
    (iii) Inspection of the service records of a home in question 
and of homes of the same design or construction, as appropriate, 
produced before and after that home;
    (iv) Inspection of manufacturer quality control records to 
determine whether quality control procedures were followed and, if 
not, the time period during which they were not;
    (v) Inspection of IPIA records to determine whether the defect, 
serious defect, or imminent safety hazard was either detected or 
specifically found not to exist in some manufactured homes;
    (vi) Identification of the cause as relating to a particular 
employee whose work, or to a process whose use, would have been 
common to the production of the manufacturer's homes for a period of 
time; and
    (vii) Inspection of records relating to components supplied by 
other parties and known to contain or suspected of containing a 
defect, a serious defect, or an imminent safety hazard.
    (3) When the Secretary or an SAA decides the method chosen by 
the manufacturer to conduct an investigation in order to make a 
class determination is not the most appropriate method, the 
Secretary or SAA must explain in writing to the manufacturer why the 
chosen method is not the most appropriate.
    (d) Documentation required. The manufacturer must comply with 
the recordkeeping requirements in Sec.  3282.417 as

[[Page 34468]]

applicable to its determinations and any IPIA concurrence or 
statement that it does not concur.

Sec.  3282.405 Notification pursuant to manufacturer's determination.

    (a) General requirement. Every manufacturer of manufactured 
homes must provide notification as set out in this section with 
respect to any manufactured home produced by the manufacturer in 
which the manufacturer determines, in good faith, that there exists 
or likely exists:
    (1) A serious defect or an imminent safety hazard; or
    (2) The same defect caused by a manufacturer, including a person 
performing work or providing a component on behalf of the 
manufacturer, that has been introduced systematically into more than 
one home.
    (b) Requirements by category. (1) Noncompliance. A manufacturer 
must provide notification of a noncompliance only when ordered to do 
so by the Secretary or an SAA pursuant to Sec. Sec.  3282.412 and 
3282.413.
    (2) Defects. When a manufacturer has made a determination in 
accordance with Sec.  3282.404 that a defect exists or likely exists 
in more than one home, the manufacturer must prepare a plan for 
notification in accordance with Sec.  3282.408, and must provide 
notification with respect to each manufactured home in the class of 
manufactured homes.
    (3) Serious defects and imminent safety hazards. When a 
manufacturer has made a determination in accordance with Sec.  
3282.404 that a serious defect or imminent safety hazard exists or 
likely exists, the manufacturer must prepare a plan for notification 
in accordance with Sec.  3282.408, must provide notification with 
respect to all manufactured homes in which the serious defect or 
imminent safety hazard exists or likely exists, and must correct the 
home or homes in accordance with Sec.  3282.406.
    (c) Plan for notification required. (1) If a manufacturer 
determines that it is responsible for providing notification under 
this section, the manufacturer must prepare and receive approval on 
a plan for notification as set out in Sec.  3282.408, unless the 
manufacturer meets alternative requirements established in Sec.  
3282.407.
    (2) If the Secretary or SAA orders a manufacturer to provide 
notification in accordance with the procedures in Sec. Sec.  
3282.412 and 3282.413, the Secretary or SAA has the option of 
requiring a manufacturer to prepare and receive approval on a plan 
for notification.
    (d) Method of notification. When a manufacturer provides 
notification as required under this section, notification must be:
    (1) By certified mail or other more expeditious means to each 
retailer or distributor to whom any manufactured home in the class 
of homes containing the defect, serious defect, or imminent safety 
hazard was delivered;
    (2) By certified or express mail to the first purchaser of each 
manufactured home in the class of manufactured homes containing the 
defect, serious defect, or imminent safety hazard, and, to the 
extent feasible, to any subsequent owner to whom any warranty 
provided by the manufacturer or required by Federal, State, or local 
law on such manufactured home has been transferred, except that 
notification need not be sent to any person known by the 
manufacturer not to own the manufactured home in question if the 
manufacturer has a record of a subsequent owner of the manufactured 
home; and
    (3) By certified or express mail to each other person who is a 
registered owner of a manufactured home in the class of homes 
containing the defect, serious defect, or imminent safety hazard and 
whose name has been ascertained pursuant to Sec.  3282.211 or is 
known to the manufacturer.

Sec.  3282.406 Required manufacturer correction.

    (a) Correction of noncompliances and defects. (1) Section 
3282.415 sets out requirements with respect to a manufacturer's 
correction of any noncompliance or defect that exists in each 
manufactured home that has been sold or otherwise released to a 
retailer but that has not yet been sold to a purchaser.
    (2) In accordance with section 623 of the Act and the 
regulations in part 3288 of this chapter, the manufacturer, 
retailer, or installer of a manufactured home must correct, at its 
expense, each failure in the performance, construction, components, 
or material of the home that renders the home or any part of the 
home not fit for the ordinary use for which it was intended and that 
is reported during the 1-year period beginning on the date of 
installation of the home.
    (b) Correction of serious defects and imminent safety hazards. 
(1) A manufacturer required to furnish notification under Sec.  
3282.405 or Sec.  3282.413 must correct, at its expense, any serious 
defect or imminent safety hazard that can be related to an error in 
design or assembly of the manufactured home by the manufacturer, 
including an error in design or assembly of any component or system 
incorporated into the manufactured home by the manufacturer.
    (2) If while making corrections under any of the provisions of 
this subpart, the manufacturer creates an imminent safety hazard or 
serious defect, the manufacturer shall correct the imminent safety 
hazard or serious defect.
    (3) Each serious defect or imminent safety hazard corrected 
under this paragraph must be brought into compliance with applicable 
Standards or, where the Standards are not specific, with the 
manufacturer's approved design.
    (c) Inclusion in plan. (1) In the plan required by Sec.  
3282.408, the manufacturer must provide for correction of those 
homes that are required to be corrected pursuant to paragraph (b) of 
this section.
    (2) If the Secretary or SAA orders a manufacturer to provide 
correction in accordance with the procedures in Sec.  3282.413, the 
Secretary or SAA has the option of requiring a manufacturer to 
prepare and receive approval on a plan for correction.
    (d) Corrections by owners. A manufacturer that is required to 
make corrections under paragraph (b) of this section or that elects 
to make corrections in accordance with Sec.  3282.407 must reimburse 
any owner of an affected manufactured home who chose to make the 
correction before the manufacturer did so for the reasonable cost of 
correction.
    (e) Correction of appliances, components, or systems. (1) If any 
appliance, component, or system in a manufactured home is covered by 
a product warranty, the manufacturer, retailer, or installer that is 
responsible under this section for correcting a noncompliance, a 
defect, a serious defect, or an imminent safety hazard in the 
appliance, component, or system may seek the required correction 
directly from the producer. The SAA that approves any plan of 
notification required pursuant to Sec.  3282.408 or the Secretary, 
as applicable, may establish reasonable time limits for the 
manufacturer of the home and the producer of the appliance, 
component, or system to agree on who is to make the correction and 
for completing the correction.
    (2) Nothing in this section shall prevent the manufacturer, 
retailer, or installer from seeking indemnification from the 
producer of the appliance, component, or system for correction work 
done on any appliance, component, or system.

Sec.  3282.407 Voluntary compliance with the notification and 
correction requirements under the Act.

    A manufacturer that takes corrective action that complies with 
one of the following three alternatives to the requirement in Sec.  
3282.408 for preparing a plan will be deemed to have provided any 
notification required by Sec.  3282.405:
    (a) Voluntary action--one home. When a manufacturer has made a 
determination that only one manufactured home is involved, the 
manufacturer is not required to provide notification pursuant to 
Sec.  3282.405 or to prepare or submit a plan if:
    (1) The manufacturer has made a determination of defect; or
    (2) The manufacturer has made a determination of serious defect 
or imminent safety hazard and corrects the home within the 20-day 
period. The manufacturer must maintain, in the plant where the 
manufactured home was manufactured, a complete record of the 
correction. The record must describe briefly the facts of the case 
and any known cause of the serious defect or imminent safety hazard 
and state what corrective actions were taken, and it must be 
maintained in the service records in a form that will allow the 
Secretary or an SAA to review all such corrections.
    (b) Voluntary action--multiple homes. Regardless of whether a 
plan has been submitted under Sec.  3282.408, the manufacturer may 
act prior to obtaining approval of the plan. Such action is subject 
to review and disapproval by the SAA of the State where the home was 
manufactured or the Secretary, unless the manufacturer obtains the 
written agreement of the SAA or the Secretary that the corrective 
action is adequate. If such an agreement is obtained, the correction 
must be accepted as adequate by all SAA's and the Secretary if the 
manufacturer makes the correction as agreed to and any imminent 
safety hazard or serious defect is eliminated.

[[Page 34469]]

    (c) Waiver. (1) A manufacturer may obtain a waiver of the 
notification requirements in Sec.  3282.405 and the plan 
requirements in Sec.  3282.408 either from the SAA of the State of 
manufacture, when all of the manufactured homes that would be 
covered by the plan were manufactured in that State, or from the 
Secretary. As of the date of a request for a waiver, the 
notification and plan requirements are deferred pending timely 
submission of any additional documentation as the SAA or the 
Secretary may require and final resolution of the waiver request. If 
a waiver request is not granted, the plan required by Sec.  3282.408 
must be submitted within 5 days after the expiration of the time 
period established in Sec.  3282.408 if the manufacturer is notified 
that the request was not granted.
    (2) The waiver may be approved if not later than 20 days after 
making the determination that notification is required, the 
manufacturer presents evidence that it in good faith believes would 
show to the satisfaction of the SAA or the Secretary that:
    (i) The manufacturer has identified all homes that would be 
covered by the plan in accordance with Sec.  3282.408;
    (ii) The manufacturer will correct, at its expense, all of the 
identified homes, either within 60 days of being informed that the 
request for waiver has been granted or within another time limit 
approved in the waiver; and
    (iii) The proposed repairs are adequate to remove the defect, 
serious defect, or imminent safety hazard that gave rise to the 
determination that correction is required; and
    (3) The manufacturer must correct all affected manufactured 
homes within 60 days of being informed that the request for waiver 
has been granted or the time limit approved in the waiver, as 
applicable. The manufacturer must record the known cause of the 
problem and the correction in the service records in an approved 
form that will allow the Secretary or SAA to review the cause and 
correction.

Sec.  3282.408 Plan of notification required.

    (a) Manufacturer's plan required. Except as provided in Sec.  
3282.407, if a manufacturer determines that it is responsible for 
providing notification under Sec.  3282.405, the manufacturer must 
prepare a plan in accordance with this section and Sec.  3282.409. 
The manufacturer must, as soon as practical, but not later than 20 
days after making the determination of defect, serious defect, or 
imminent safety hazard, submit the plan for approval to one of the 
following, as appropriate:
    (1) The SAA of the State of manufacture, when all of the 
manufactured homes covered by the plan were manufactured in that 
State; or
    (2) The Secretary, when the manufactured homes were manufactured 
in more than one State or there is no SAA in the State of 
manufacture.
    (b) Implementation of plan. Upon approval of the plan, including 
any changes for cause required by the Secretary or SAA after 
consultation with the manufacturer, the manufacturer must carry out 
the approved plan within the agreed time limits.

Sec.  3282.409 Contents of plan.

    (a) Purpose of plan. This section sets out the requirements that 
must be met by a manufacturer in preparing any plan it is required 
to submit under Sec.  3282.408. The underlying requirement is that 
the plan shows how the manufacturer will fulfill its 
responsibilities with respect to notification and correction.
    (b) Contents of plan. The plan must:
    (1) Identify, by serial number and other appropriate identifying 
criteria, all manufactured homes for which notification is to be 
provided, as determined pursuant to Sec.  3282.404;
    (2) Include a copy of the notice that the manufacturer proposes 
to use to provide the notification required by Sec.  3282.405;
    (3) Provide for correction of those manufactured homes that are 
required to be corrected pursuant to Sec.  3282.406(b);
    (4) Include the IPIA's written concurrence or statement on the 
methods used by the manufacturer to identify the homes that should 
be included in the class of homes, as required pursuant to Sec.  
3282.404(b); and
    (5) Include a deadline for completion of all notifications and 
corrections.
    (c) Contents of notice. Except as otherwise agreed by the 
Secretary or the SAA reviewing the plan under Sec.  3282.408, the 
notice to be approved as part of the plan must include the 
following:
    (1) An opening statement that reads: ``This notice is sent to 
you in accordance with the requirements of the National Manufactured 
Housing Construction and Safety Standards Act.'';
    (2) The following statement: ``[choose one, as appropriate: 
Manufacturer's name, or the Secretary, or the (insert State) SAA] 
has determined that [insert identifying criteria of manufactured 
home] may not comply with an applicable Federal Manufactured Home 
Construction or Safety Standard.''
    (3) Except when the manufacturer is providing notice pursuant to 
an approved plan or agreement with the Secretary or an SAA under 
Sec.  3282.408, each applicable statement as follows:
    (i) ``An imminent safety hazard may exist in (identifying 
criteria of manufactured home).''
    (ii) ``A serious defect may exist in (identifying criteria of 
manufactured home).''
    (iii) ``A defect may exist in (identifying criteria of 
manufactured home).''
    (4) A clear description of the defect, serious defect, or 
imminent safety hazard and an explanation of the risk to the 
occupants, which must include:
    (i) The location of the defect, serious defect, or imminent 
safety hazard in the manufactured home;
    (ii) A description of any hazards, malfunctions, deterioration, 
or other consequences that may reasonably be expected to result from 
the defect, serious defect, or imminent safety hazard;
    (iii) A statement of the conditions that may cause such 
consequences to arise; and
    (iv) Precautions, if any, that the owner can, should, or must 
take to reduce the chance that the consequences will arise before 
the manufactured home is repaired;
    (5) A statement of whether there will be any warning that a 
dangerous occurrence may take place and what that warning would be, 
and any signs that the owner might see, hear, smell, or feel which 
might indicate danger or deterioration of the manufactured home as a 
result of the defect, serious defect, or imminent safety hazard;
    (6) A statement that the manufacturer will correct the 
manufactured home, if the manufacturer will correct the manufactured 
home under this subpart or otherwise;
    (7) A statement in accordance with whichever of the following is 
appropriate:
    (i) Where the manufacturer will correct the manufactured home at 
no cost to the owner, the statement must indicate how and when the 
correction will be done, how long the correction will take, and any 
other information that may be helpful to the owner; or
    (ii) When the manufacturer does not bear the cost of repair, the 
notification must include a detailed description of all parts and 
materials needed to make the correction, a description of all steps 
to be followed in making the correction including appropriate 
illustrations, and an estimate of the cost of the purchaser or owner 
of the correction;
    (8) A statement informing the owner that the owner may submit a 
complaint to the SAA or Secretary if the owner believes that:
    (i) The notification or the remedy described therein is 
inadequate;
    (ii) The manufacturer has failed or is unable to remedy the 
problem in accordance with its notification; or
    (iii) The manufacturer has failed or is unable to remedy within 
a reasonable time after the owner's first attempt to obtain remedy; 
and
    (9) A statement that any actions taken by the manufacturer under 
the Act in no way limit the rights of the owner or any other person 
under any contract or other applicable law and that the owner may 
have further rights under contract or other applicable law.

Sec.  3282.410 Implementation of plan.

    (a) Deadline for notifications. (1) The manufacturer must 
complete the notifications carried out under a plan approved by an 
SAA or the Secretary under Sec.  3282.408 on or before the deadline 
approved by the SAA or Secretary. In approving each deadline, an SAA 
or the Secretary will allow a reasonable time to complete all 
notifications, taking into account the number of manufactured homes 
involved and the difficulty of completing the notifications.
    (2) The manufacturer must, at the time of dispatch, furnish to 
the SAA or the Secretary a true or representative copy of each 
notice, bulletin, and other written communication sent to retailers, 
distributors, or owners of manufactured homes regarding any serious 
defect or imminent safety hazard that may exist in any homes 
produced by the manufacturer, or regarding any noncompliance or 
defect for which the SAA or Secretary requires, under Sec.  
3282.413(c), the manufacturer to submit a plan for providing 
notification.
    (b) Deadline for corrections. A manufacturer that is required to 
correct a serious defect or imminent safety hazard pursuant to Sec.  
3282.406(b) must complete implementation of the plan required by

[[Page 34470]]

Sec.  3282.408 on or before the deadline approved by the SAA or the 
Secretary. The deadline must be no later than 60 days after approval 
of the plan. In approving the deadline, the SAA or the Secretary 
will allow a reasonable amount of time to complete the plan, taking 
into account the seriousness of the problem, the number of 
manufactured homes involved, the immediacy of any risk, and the 
difficulty of completing the action. The seriousness and immediacy 
of any risk posed by the serious defect or imminent safety hazard 
will be given greater weight than other considerations.
    (c) Extensions. An SAA that approved a plan or the Secretary may 
grant an extension of the deadlines included in a plan if the 
manufacturer requests such an extension in writing and shows good 
cause for the extension, and the SAA or the Secretary decides that 
the extension is justified and is not contrary to the public 
interest. When the Secretary grants an extension for completion of 
any corrections, the Secretary will notify the manufacturer and must 
publish notice of such extension in the Federal Register. When an 
SAA grants an extension for completion of any corrections, the SAA 
must notify the Secretary and the manufacturer.
    (d) Recordkeeping. The manufacturer must provide the report and 
maintain the records that are required by Sec.  3282.417 for all 
notification and correction actions.

Sec.  3282.411 Administrative initiation of remedial action.

    (a) Administrative review of information. Whenever the Secretary 
or an SAA has information indicating the possible existence of a 
noncompliance, defect, serious defect, or imminent safety hazard in 
a manufactured home, the Secretary or SAA may initiate 
administrative review of the need for notification and correction in 
accordance with paragraphs (b) and (c) of this section.
    (b) SAA authority. (1) An SAA that decides to initiate such 
administrative review must refer the matter to the SAA in the state 
of manufacture or, whenever the affected manufactured homes were 
manufactured in more than one state, to the Secretary for possible 
action pursuant to Sec.  3282.412.
    (2) An SAA in a State of manufacture is permitted to issue a 
preliminary determination in accordance with Sec.  3282.412 under 
the following circumstances:
    (i) The SAA believes that a manufactured home that has been sold 
or otherwise released by a manufacturer to a retailer or 
distributor, but for which there is no completed sale to a 
purchaser, contains a noncompliance, defect, serious defect, or 
imminent safety hazard;
    (ii) The SAA believes that the information referenced in 
paragraph (a) of this section indicates a class of homes in which a 
noncompliance or defect possibly exists;
    (iii) The SAA believes that the information referenced in 
paragraph (a) of this section indicates one or more homes in which a 
serious defect or an imminent safety hazard possibly exists;
    (iv) The SAA is reviewing a plan under Sec.  3282.408 and the 
SAA and manufacturer disagree on proposed changes to the plan;
    (v) The SAA believes that the manufacturer has failed to fulfill 
the requirements of a waiver granted under Sec.  3282.407; or
    (vi) There is evidence that a manufacturer in the State failed 
to make the determinations required under Sec.  3282.404.
    (3) For purposes of this paragraph (b), the conclusion that 
there is a class of homes in which a noncompliance or defect 
possibly exists must be based on the same factors that are 
established for a manufacturer's class determination in Sec.  
3282.404(b). If evidence arises that the manufactured homes in the 
class were manufactured in more than one state, the SAA must refer 
the matter to the Secretary for any further action.
    (4) An SAA that issues a preliminary determination must provide 
a copy of the preliminary determination to the Secretary at the time 
of its issuance. Failure to comply with this requirement does not 
affect the validity of the preliminary determination.
    (c) Secretary authority. The Secretary may make a preliminary 
determination in accordance with Sec.  3282.412 when:
    (1) There is evidence that a noncompliance, defect, serious 
defect, or imminent safety hazard possibly exists in any 
manufactured home; or
    (2) There is evidence that the manufacturer failed to make the 
determinations required under Sec.  3282.404.
    (d) Secretary notification. The Secretary will notify the SAA of 
each State where the affected homes were manufactured and, to the 
extent it is reasonable, the SAA of each State where the homes are 
located of the issuance of a preliminary determination. Failure to 
comply with this requirement does not affect the validity of the 
preliminary determination.

Sec.  3282.412 Preliminary and final administrative determinations.

    (a) Issuance of preliminary determination. In accordance with 
Sec.  3282.411, the Secretary or an SAA may issue a Notice of 
Preliminary Determination when:
    (1) The manufacturer has not provided to the Secretary or SAA 
the necessary information to make a determination that:
    (i) A noncompliance, defect, serious defect, or imminent safety 
hazard possibly exists; or
    (ii) A manufacturer had information that likely indicates a 
noncompliance, defect, serious defect, or imminent safety hazard for 
which the manufacturer failed to make the determinations required 
under Sec.  3282.404; or
    (2) The Secretary or SAA has information that likely indicates a 
noncompliance, a defect, a serious defect, or an imminent safety 
hazard exists.
    (b) Notice of Preliminary Determination. (1) The Notice of 
Preliminary Determination must be sent by certified mail or express 
delivery and must:
    (i) Include the factual basis for the determination;
    (ii) Include the criteria used to identify any class of homes in 
which the noncompliance, defect, serious defect, or imminent safety 
hazard possibly exists;
    (iii) If applicable, indicate that the manufacturer may be 
required to make corrections on a home or in a class of homes; and
    (iv) If the preliminary determination is that the manufacturer 
failed to make an initial determination required under Sec.  
3282.404(a), include an allegation that the manufacturer failed to 
act in good faith.
    (2) The Notice of Preliminary Determination must inform the 
manufacturer that the preliminary determination will become final 
unless the manufacturer requests a hearing or presentation of views 
under subpart D of this part.
    (c) Presentation of views. (1) The Secretary or the SAA, as 
applicable, must receive the manufacturer's request for a hearing or 
presentation of views:
    (i) Within 15 days of delivery of the Notice of Preliminary 
Determination of serious defect, defect, or noncompliance; or
    (ii) Within 5 days of delivery of the Notice of Preliminary 
Determination of imminent safety hazard.
    (2) A Formal or an Informal Presentation of Views will be held 
in accordance with Sec.  3282.152 promptly upon receipt of a 
manufacturer's request under paragraph (c) of this section.
    (d) Issuance of Final Determination. (1) The SAA or the 
Secretary, as appropriate, may make a Final Determination that an 
imminent safety hazard, serious defect, defect, or noncompliance 
exists, or that the manufacturer failed to make the determinations 
required under Sec.  3282.404, if:
    (i) The manufacturer fails to respond to the Notice of 
Preliminary Determination within the time period established in 
paragraph (c)(2) of this section; or
    (ii) The SAA or the Secretary decides that the views and 
evidence presented by the manufacturer or others are insufficient to 
rebut the preliminary determination.
    (2) At the time that the SAA or Secretary makes a Final 
Determination that an imminent safety hazard, serious defect, 
defect, or noncompliance exists, the SAA or Secretary, as 
appropriate, must issue an order in accordance with Sec.  3282.413.

Sec.  3282.413 Implementation of Final Determination.

    (a) Issuance of orders. (1) The SAA or the Secretary, as 
appropriate, must issue an order directing the manufacturer to 
furnish notification if:
    (i) The SAA makes a Final Determination that a defect or 
noncompliance exists in a class of homes;
    (ii) The Secretary makes a Final Determination that an imminent 
safety hazard, serious defect, defect, or noncompliance exists; or
    (iii) The SAA makes a Final Determination that an imminent 
safety hazard or serious defect exists in any home and the SAA has 
received the Secretary's concurrence on the issuance of the Final 
Determination and order.
    (2) The SAA or the Secretary, as appropriate, must issue an 
order directing the manufacturer to make corrections in any affected 
manufactured home if:
    (i) The SAA or the Secretary makes a Final Determination that a 
defect or noncompliance exists in a manufactured home that has been 
sold or otherwise released by a manufacturer to a retailer or

[[Page 34471]]

distributor but for which the sale to a purchaser has not been 
completed;
    (ii) The Secretary makes a Final Determination that an imminent 
safety hazard or serious defect exists; or
    (iii) The SAA makes a Final Determination that an imminent 
safety hazard or serious defect exists in any home and the SAA has 
received the Secretary's concurrence on the issuance of the Final 
Determination and order.
    (3) Only the Secretary may issue an order directing a 
manufacturer to repurchase or replace any manufactured home already 
sold to a purchaser, unless the Secretary authorizes an SAA to issue 
such an order.
    (4) An SAA that has a concurrence or authorization from the 
Secretary on any order issued under this section must have the 
Secretary's concurrence on any subsequent changes to the order. An 
SAA that has issued a Preliminary Determination must have the 
Secretary's concurrence on any waiver of notification or any 
settlement when the concerns addressed in the Preliminary 
Determination involve a serious defect or an imminent safety hazard.
    (5) If an SAA or the Secretary makes a Final Determination that 
the manufacturer failed to make in good faith an initial 
determination required under Sec.  3282.404(a):
    (i) The SAA may impose any penalties or take any action 
applicable under State law and may refer the matter to the Secretary 
for appropriate action; and
    (ii) The Secretary may take any action permitted by law.
    (b) Decision to order replacement or repurchase. The SAA or the 
Secretary will order correction of any manufactured home covered by 
an order issued in accordance with paragraph (a) of this section 
unless any requirements and factors applicable under Sec.  3282.414 
and Sec.  3282.415 indicate that the SAA or the Secretary should 
order replacement or repurchase of the home.
    (c) Time for compliance with order. (1) The SAA or the Secretary 
may require the manufacturer to submit a plan for providing any 
notification and any correction, replacement, or repurchase remedy 
that results from an order under this section. The manufacturer's 
plan must include the method and date by which notification and any 
corrective action will be provided.
    (2) The manufacturer must provide any such notification and 
correction, replacement, or repurchase remedy as early as 
practicable, but not later than:
    (i) Thirty (30) days, in the case of a Final Determination of 
imminent safety hazard or when the SAA or Secretary has ordered 
replacement or repurchase of a home pursuant to Sec.  3282.414; or
    (ii) Sixty (60) days, in the case of a Final Determination of 
serious defect, defect, or noncompliance.
    (3) Subject to the requirements of paragraph (a)(3) of this 
section, the SAA that issued the order or the Secretary may grant an 
extension of the deadline for compliance with an order if:
    (i) The manufacturer requests such an extension in writing and 
shows good cause for the extension; and
    (ii) The SAA or the Secretary is satisfied that the extension is 
justified in the public interest.
    (4) When the SAA grants an extension, it must notify the 
manufacturer and forward to the Secretary a draft of a notice of the 
extension for the Secretary to publish in the Federal Register. When 
the Secretary grants an extension, the Secretary must notify the 
manufacturer and publish notice of such extension in the Federal 
Register.
    (d) Appeal of SAA determination. Within 10 days of a 
manufacturer receiving notice that an SAA has made a Final 
Determination that an imminent safety hazard, serious defect, 
defect, or noncompliance exists or that the manufacturer failed to 
make the determinations required under Sec.  3282.404, the 
manufacturer may appeal the Final Determination to the Secretary 
under Sec.  3282.309.
    (e) Settlement offers. A manufacturer may propose in writing, at 
any time, an offer of settlement which shall be submitted to and 
considered by the Secretary or the SAA that issued the Notice of 
Preliminary Determination. The Secretary or the SAA has the option 
of providing the manufacturer making the offer with an opportunity 
to make an oral presentation in support of such offer. If the 
manufacturer is notified that an offer of settlement is rejected, 
the offer is deemed to have been withdrawn and will not constitute a 
part of the record in the proceeding. Final acceptance by the 
Secretary or an SAA of any offer of settlement automatically 
terminates any proceedings related to the matter involved in the 
settlement.
    (f) Waiver of notification. (1) At any time after the Secretary 
or an SAA has issued a Notice of Preliminary Determination, the 
manufacturer may request the Secretary or SAA to waive any formal 
notification requirements. When requesting a waiver, the 
manufacturer must certify that:
    (i) The manufacturer has made a class determination in 
accordance with Sec.  3282.404(b);
    (ii) The manufacturer will correct, at the manufacturer's 
expense, all affected manufactured homes in the class within a time 
period that is specified by the Secretary or SAA, but is not later 
than 60 days after the manufacturer is notified of the acceptance of 
the request for waiver or the issuance of any Final Determination, 
whichever is later; and
    (iii) The proposed repairs are adequate to correct the 
noncompliance, defect, serious defect, or imminent safety hazard 
that gave rise to the issuance of the Notice of Preliminary 
Determination.
    (2) If the Secretary or SAA grant a waiver, the manufacturer 
must reimburse any owner of an affected manufactured home who chose 
to make the correction before the manufacturer did so for the 
reasonable cost of correction.
    (g) Recordkeeping. The manufacturer must provide the report and 
maintain the records that are required by Sec.  3282.417 for all 
notification and correction actions.

Sec.  3282.414 Replacement or repurchase of homes after sale to 
purchaser.

    (a) Order to replace or repurchase. Whenever a manufacturer 
cannot fully correct an imminent safety hazard or a serious defect 
in a manufactured home for which there is a completed sale to a 
purchaser within 60 days of the issuance of an order under Sec.  
3282.413 or any extension of the 60-day deadline that has been 
granted by the Secretary in accordance with Sec.  3282.413(c), the 
Secretary or, if authorized in writing by the Secretary in 
accordance with Sec.  3282.413(a)(3), the SAA may require that the 
manufacturer:
    (1) Replace the manufactured home with a home that:
    (i) Is substantially equal in size, equipment, and quality; and
    (ii) Either is new or is in the same condition that the 
defective manufactured home would have been in at the time of 
discovery of the imminent safety hazard or serious defect had the 
imminent safety hazard or serious defect not existed; or
    (2) Take possession of the manufactured home, if the Secretary 
or the SAA so orders, and refund the purchase price in full, except 
that the amount of the purchase price may be reduced by a reasonable 
amount for depreciation if the home has been in the possession of 
the owner for more than 1 year and the amount of depreciation is 
based on:
    (i) Actual use of the home; and
    (ii) An appraisal system approved by the Secretary or the SAA 
that does not take into account damage or deterioration resulting 
from the imminent safety hazard or serious defect.
    (b) Factors affecting order. In determining whether to order 
replacement or refund by the manufacturer, the Secretary or the SAA 
will consider:
    (1) The threat of injury or death to manufactured home 
occupants;
    (2) Any costs and inconvenience to manufactured home owners that 
will result from the lack of adequate repair within the specified 
period;
    (3) The expense to the manufacturer;
    (4) Any obligations imposed on the manufacturer under contract 
or other applicable law of which the Secretary or the SAA has 
knowledge; and
    (5) Any other relevant factors that may be brought to the 
attention of the Secretary or the SAA.
    (c) Owner's election of remedy. When under contract or other 
applicable law the owner has the right of election between 
replacement and refund, the manufacturer must inform the owner of 
such right of election and must inform the Secretary of the 
election, if any, made by the owner.
    (d) Recordkeeping. The manufacturer must provide the report that 
is required by Sec.  3282.417 when a manufactured home has been 
replaced or repurchased under this section.

Sec.  3282.415 Correction of homes before sale to purchaser.

    (a) Sale or lease prohibited. Manufacturers, retailers, and 
distributors must not sell, lease, or offer for sale or lease any 
manufactured home that they have reason to know in the

[[Page 34472]]

exercise of due care contains a noncompliance, defect, serious 
defect, or an imminent safety hazard. The sale of a home to a 
purchaser is complete when all contractual obligations of the 
manufacturer, retailer, and distributor to the purchaser have been 
met.
    (b) Retailer/distributor notification to manufacturer. When a 
retailer, acting as a reasonable retailer, or a distributor, acting 
as a reasonable distributor, believes that a manufactured home that 
has been sold to the retailer or distributor, but for which there is 
no completed sale to a purchaser, likely contains a noncompliance, 
defect, serious defect, or an imminent safety hazard, the retailer 
or distributor must notify the manufacturer of the home in a timely 
manner.
    (c) Manufacturer's remedial responsibilities. Upon a Final 
Determination pursuant to Sec.  3282.412 by the Secretary or an SAA, 
a determination by a court of appropriate jurisdiction, or a 
manufacturer's own determination that a manufactured home that has 
been sold to a retailer but for which there is no completed sale to 
a purchaser contains a noncompliance, defect, serious defect, or an 
imminent safety hazard, if caused by the manufacturer or a person 
working on behalf of the manufacturer, or when the retailer/
distributor has not made the corrections for the problems they 
cause, the manufacturer must do one of the following:
    (1) Immediately repurchase such manufactured home from the 
retailer or distributor at the price paid by the retailer or 
distributor, plus all transportation charges involved, if any, and a 
reasonable reimbursement of not less than 1 percent per month of 
such price paid prorated from the date the manufacturer receives 
notice by certified mail of the noncompliance, defect, serious 
defect, or imminent safety hazard; or
    (2) At its expense, immediately furnish to the retailer or 
distributor all required parts or equipment for installation in the 
home by the retailer or distributor, and the manufacturer must 
reimburse the retailer or distributor for the reasonable value of 
the retailer's or distributor's work, plus a reasonable 
reimbursement of not less than 1 percent per month of the 
manufacturer's or distributor's selling price prorated from the date 
the manufacturer receives notice by certified mail to the date the 
noncompliance, defect, serious defect, or imminent safety hazard is 
corrected, so long as the retailer or distributor proceeds with 
reasonable diligence with the required work; or
    (3) Carry out all needed corrections to the home.
    (d) Retailer/distributor responsibilities. Upon a Final 
Determination pursuant to 3282.412 by the Secretary or an SAA, a 
determination by a court of appropriate jurisdiction, or an 
agreement reached under section 623(c)(12) of the Act [Dispute 
Resolution] that a retailer/distributor is responsible for taking a 
home out of compliance with the construction standards and that the 
home contains a noncompliance, defect, serious defect, or an 
imminent safety hazard, the retailer/distributor must, before it is 
permitted to sell the home:
    (1) At its expense, immediately obtain approved designs or 
instructions from the manufacturer and all required parts and 
equipment for correction of the home and reimburse the manufacturer 
or the person authorized by the manufacturer to make the corrections 
on the home; or
    (2) Carry out all needed corrections to the home when approved 
by the manufacturer.
    (e) Establishing costs. The value of reasonable reimbursements 
as specified in paragraph (c) of this section will be fixed by 
either:
    (1) Mutual agreement of the manufacturer and retailer or 
distributor; or
    (2) A court in an action brought under section 613(b) of the Act 
(42 U.S.C. 5412(b)).
    (f) Records required. The manufacturer and the retailer or 
distributor must maintain records of their actions taken under this 
section in accordance with Sec.  3282.417.
    (g) Exception for leased homes. This section does not apply to 
any manufactured home purchased by a retailer or distributor that 
has been leased by such retailer or distributor to a tenant for 
purposes other than resale. Other remedies that may be available to 
a retailer or distributor under subpart I of this part continue to 
be applicable.
    (h) Indemnification. A manufacturer may indemnify itself through 
agreements or contracts with retailers, distributors, transporters, 
installers, or others for the costs of repurchase, parts, equipment, 
and corrective work incurred by the manufacturer pursuant to 
paragraph (c).

Sec.  3282.416 Oversight of notification and correction activities.

    (a) IPIA responsibilities. The IPIA in each manufacturing plant 
must:
    (1) Assure that notifications required under this subpart I are 
sent to all owners, purchasers, retailers, and distributors of whom 
the manufacturer has knowledge;
    (2) Audit the certificates required by Sec.  3282.417 to assure 
that the manufacturer has made required corrections;
    (3) Whenever a manufacturer is required to determine a class of 
homes pursuant to Sec.  3282.404(b), provide either:
    (i) The IPIA's written concurrence on the methods used by the 
manufacturer to identify the homes that should be included in the 
class of homes; or
    (ii) The IPIA's written statement explaining why it believes the 
manufacturer's methods for determining the class of homes were 
inappropriate or inadequate; and
    (4) Periodically review the manufacturer's service records of 
determinations under Sec.  3282.404 and take appropriate action in 
accordance with Sec. Sec.  3282.362(c) and 3282.364.
    (b) SAA and Secretary's responsibilities. (1) SAA oversight of 
manufacturer compliance with this subpart I will be done primarily 
by periodically checking the records that manufacturers are required 
to keep under Sec.  3282.417.
    (2) The SAA or Secretary to which the report required by Sec.  
3282.417(a) is sent is responsible for assuring through oversight 
that remedial actions have been carried out as described in the 
report. The SAA of the State in which an affected manufactured home 
is located may inspect that home to determine whether any correction 
required under this subpart I is carried out in accordance with the 
approved plan or, if there is no plan, to the Standards or other 
approval obtained by the manufacturer.

Sec.  3282.417 Recordkeeping requirements.

    (a) Manufacturer report on notifications and corrections. Within 
30 days after the deadline for completing any notifications, 
corrections, replacement, or repurchase required pursuant to this 
subpart I, the manufacturer must provide a complete report of the 
action taken to, as appropriate, the Secretary or the SAA that 
approved the plan under Sec.  3282.408, granted a waiver, or issued 
the order under Sec.  3282.413. If any other SAA or the Secretary 
forwarded the relevant consumer complaint or other information to 
the manufacturer in accordance with Sec.  3282.403, the manufacturer 
must send a copy of the report to that SAA or the Secretary, as 
applicable.
    (b) Records of manufacturer's determinations. (1) A manufacturer 
must record each initial and class determination required under 
Sec.  3282.404 in its service records, in a manner approved by the 
Secretary or an SAA and that identifies who made each determination, 
what each determination was, and all bases for each determination. 
Such information must be available for review by the IPIA.
    (2) The manufacturer records must include:
    (i) The information it received that likely indicated a 
noncompliance, defect, serious defect, or imminent safety hazard;
    (ii) All of the manufacturer's determinations and each basis for 
those determinations;
    (iii) The methods used by the manufacturer to establish any 
class, including, when applicable, the cause of the defect, serious 
defect, or imminent safety hazard; and
    (iv) Any IPIA concurrence or statement that it does not concur 
with the manufacturer's class determination, in accordance with 
Sec.  3282.404(b).
    (c) Manufacturer records of notifications. When a manufacturer 
is required to provide notification under this subpart, the 
manufacturer must maintain in its files a copy of each type of 
notice sent and a complete list of the persons notified and their 
addresses. The manufacturer must maintain these records in a manner 
approved by the Secretary or an SAA to identify each notification 
campaign.
    (d) Manufacturer records of corrections. When a manufacturer is 
required to provide or provides correction under this subpart, the 
manufacturer must maintain in its files one of the following, as 
appropriate, for each manufactured home involved:
    (1) If the correction is made, a certification by the 
manufacturer that the repair was made to conform to the Federal 
construction and safety standards in effect at the time the home was 
manufactured and that each identified imminent safety hazard or 
serious defect has been corrected; or
    (2) If the owner refuses to allow the manufacturer to repair the 
home, a certification by the manufacturer that:
    (i) The owner has been informed of the problem that may exist in 
the home;

[[Page 34473]]

    (ii) The owner has been provided with a description of any 
hazards, malfunctions, deterioration, or other consequences that may 
reasonably be expected to result from the defect, serious defect, or 
imminent safety hazard; and
    (iii) An attempt has been made to repair the problems, but the 
owner has refused the repair.
    (e) Retailer and distributor records of corrections. When a 
retailer or distributor makes corrections necessary to bring a 
manufactured home into compliance with the Standards, the retailer 
or distributor must maintain a complete record of its actions.
    (f) Length of retention. Records of the information and any 
other records required to be maintained by this subpart must be kept 
for a minimum of 5 years from the date the manufacturer, retailer, 
or distributor, as applicable:
    (1) Received the information;
    (2) Creates the record; or
    (3) Completes the notification or correction campaign.

Sec.  3282.418 Factors for appropriateness and amount of civil 
penalties.

    In determining whether to seek a civil penalty for a violation 
of the requirements of this subpart I, and the amount of such 
penalty to be recommended, the Secretary will consider the 
provisions of the Act and the following factors:
    (a) The gravity of the violation;
    (b) The degree of the violator's culpability, including whether 
the violator had acted in good faith in trying to comply with the 
requirements;
    (c) The injury to the public;
    (d) Any injury to owners or occupants of manufactured homes;
    (e) The ability to pay the penalty;
    (f) Any benefits received by the violator;
    (g) The extent of potential benefits to other persons;
    (h) Any history of prior violations;
    (i) Deterrence of future violations; and
    (j) Such other factors as justice may require.

[End of MHCC recommended text.]

[FR Doc. 06-5390 Filed 6-9-06; 1:27 pm]
BILLING CODE 4210-67-P