[Federal Register Volume 72, Number 92 (Monday, May 14, 2007)]
[Rules and Regulations]
[Pages 27222-27236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2363]



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Part III





Department of Housing and Urban Development





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24 CFR Parts 3280, 3282, and 3288



 Manufactured Home Dispute Resolution Program; Final Rule

  Federal Register / Vol. 72, No. 92 / Monday, May 14, 2007 / Rules and 
Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 3280, 3282, and 3288

[Docket No. FR-4813-F-03]
RIN 2502-AH98


Manufactured Home Dispute Resolution Program

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

ACTION: Final rule.

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SUMMARY: This rule establishes a federal manufactured home dispute 
resolution program and guidelines for the creation of state-
administered dispute resolution programs. Under the National 
Manufactured Housing Construction and Safety Standards Act of 1974, as 
amended by the Manufactured Housing Improvement Act of 2000, HUD is 
required to establish a program for the timely resolution of disputes 
among manufacturers, retailers, and installers of manufactured homes 
regarding responsibility, and the issuance of appropriate orders, for 
the correction or repair of defects in manufactured homes that are 
reported during the 1-year period beginning on the date of 
installation.

DATES: Effective Date: February 8, 2008.

FOR FURTHER INFORMATION CONTACT: William W. Matchneer III, Associate 
Deputy Assistant Secretary for Regulatory Affairs and Manufactured 
Housing, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 9164, 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: 

I. Background

Requirement for a Dispute Resolution Program

    The National Manufactured Housing Construction and Safety Standards 
Act of 1974 (the Act) (42 U.S.C. 5401-5426) is intended, in part, to 
protect the quality, safety, durability, and affordability of 
manufactured homes. The Act was amended on December 27, 2000, by the 
Manufactured Housing Improvement Act of 2000, Public Law 106-569, to 
require HUD, among other things, to establish and implement a new 
manufactured home dispute resolution program for states that choose not 
to operate their own dispute resolution programs and to establish 
guidelines for the creation of state-administered dispute resolution 
programs.
    Specifically, section 623(c)(12) of the Act (42 U.S.C. 5422(c)(12)) 
calls for the implementation of ``a dispute resolution program for the 
timely resolution of disputes between manufacturers, retailers, and 
installers of manufactured homes regarding responsibility, and for the 
issuance of appropriate orders, for the correction or repair of defects 
in manufactured homes that are reported during the 1-year period 
beginning on the date of installation.'' A state is not required to be 
a State Administrative Agency under HUD's manufactured home program to 
administer its own dispute resolution program. However, any state 
submitting a state plan to change its status from a nonparticipating 
state to a conditionally or fully approved State Administrative Agency 
after the effective date must provide for a dispute resolution program 
as part of its plan. Any state that was conditionally or fully approved 
before the effective date will not be required to include a dispute 
resolution program in its state plan, as long as the state maintains 
conditionally or fully approved status. Section 623(g)(2) of the Act 
requires HUD to implement a HUD Manufactured Home Dispute Resolution 
Program that will meet the above requirements in any state that has not 
established a program that complies with the Act. The state where the 
home is sited determines whether the HUD Manufactured Home Dispute 
Resolution Program or the state program applies.

Proposed Rule

    On October 20, 2005, HUD published the Manufactured Home Dispute 
Resolution Program Proposed Rule (70 FR 61178) with a comment due date 
of December 19, 2005. HUD received responses from 20 commenters during 
the comment period. The commenters included two state agencies, several 
statewide and national manufactured housing associations, individuals, 
the Manufactured Housing Consensus Committee (MHCC), and one low-income 
housing organization.

II. Particular Areas of Interest to Commenters

    This section of the preamble discusses particular areas of interest 
to commenters in addition to the discussions of public comments that 
appear throughout the preamble in conjunction with the description of 
the dispute resolution program adopted in this final rule.

General

    As previously discussed, HUD was charged with implementing a system 
to resolve disputes among manufacturers, retailers, and installers. As 
several commenters noted, the proposed rule did not include a 
definition of ``installer.'' In response to this comment, this rule 
defines the term ``installer.'' Additional information regarding 
installers may be found in the Manufactured Home Installation Program 
Proposed Rule published June 14, 2006 (71 FR 34476).
    Even though the Act does not require their participation in the HUD 
Dispute Resolution Program, HUD views the participation of homeowners 
as a crucial element to a viable program. Under Section 625 of the Act, 
HUD has the broad authority to involve homeowners in the dispute 
resolution program. Consistent with the proposed rule, this final rule 
gives homeowners the right to participate in the HUD Dispute Resolution 
Program by initiating the Mediation and Arbitration Process and by 
acting as observers of the process. This final rule does not recognize 
homeowners as parties.
    HUD and the MHCC, in its meetings, recognized that it may have been 
possible under the proposed rule for the parties to argue that there is 
no dispute between them when in fact there is a defect that needs 
correction. In this final rule, HUD has ensured that the HUD 
Manufactured Home Dispute Resolution Program results in a proper 
determination of defect and culpability.

Funding

    The MHCC and commenters have continued to recommend that parties 
that use and receive the benefits of the dispute resolution process pay 
at least a portion of the direct costs associated with the program. HUD 
agrees with this ``fees for service'' approach and is currently seeking 
statutory authority to assess users of the program a fee for costs 
associated with the program. Absent such authority, the Department will 
absorb the cost of running the program in HUD-administered states as 
general program expenses. It is anticipated that such fees for service 
would not be used to cover the purely administrative costs to HUD of 
implementing the program, but would include a filing fee to initiate a 
dispute resolution process, a fee to initiate arbitration, and the 
assessment of arbitration costs to a losing party. Other administrative 
costs of the program in HUD-administered states would be funded as 
general program expenses.

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    Several commenters stated it is unfair to consumers in states with 
their own dispute resolution programs both to pay for their state's 
program and subsidize the administration of HUD's program in states 
that are not offering programs. The Department is sensitive to this 
issue. However, because fees for service are not currently authorized, 
the financing of the HUD Manufactured Home Dispute Program will be 
absorbed as a general Office of Manufactured Housing program expense as 
described above.
    As discussed in the proposed rule, HUD will use mediation and 
arbitration, two widely accepted methods of dispute resolution, as well 
as an alternative process that will allow manufacturers, retailers, and 
installers an opportunity to resolve disputes outside of the HUD 
Mediation and Arbitration Process established by this rule. The 
addition of an alternate process to the HUD Manufactured Home Dispute 
Resolution Program is based on comments received from the MHCC. In its 
comments to the proposed rule, the MHCC recommended that a term other 
than ``Commercial Opt-Out Option'' be used for the alternate process. 
In its place, HUD has substituted the term ``Alternative Process.''
    The HUD Manufactured Home Dispute Resolution Program reflects the 
Executive Branch's emphasis on utilizing dispute resolution processes 
to resolve conflicts in a cost-effective and expeditious manner, and on 
fostering good government by giving parties the opportunity to resolve 
disputes amicably and creatively through alternative dispute 
resolution. It also dovetails with Congress' active promotion of 
alternative dispute resolution as set forth in the Administrative 
Dispute Resolution Act of 1996 (5 U.S.C. 571 et seq.).
    There were several comments to the proposed rule about the 
relationship between the HUD Dispute Resolution Program and subpart I 
of 24 CFR part 3282 (Subpart I). This final dispute resolution rule is 
not inconsistent with other requirements of the Act. Specifically, 
nothing in this final rule absolves the manufacturer of its 
notification and correction responsibilities or other obligations under 
Subpart I. The dispute resolution program provides an additional 
homeowner protection mechanism and does not toll or replace the 
manufacturer's responsibilities under Subpart I. Furthermore, the HUD 
Dispute Resolution Program does not replace any manufacturer's warranty 
program.

III. Program Administration for the HUD-Administered Program

    HUD interprets the language set forth in section 623(g)(3) of the 
Act (42 U.S.C. 5422(g)(3)) as permitting the use of contractors in the 
implementation of the dispute resolution program in HUD-administered 
states. HUD will likely use contractors as screening neutrals, 
mediators, and arbitrators, and they will be required to become 
familiar with HUD's manufactured home program. HUD acknowledges, 
however, that dispute resolution experts emphasize that a primary 
consideration for selecting neutrals, mediators, and arbitrators should 
be their background and experience in dispute resolution.
    The HUD Manufactured Home Dispute Resolution Program is governed by 
the Administrative Dispute Resolution Act, 5 U.S.C. 571 et seq. The HUD 
Manufactured Home Dispute Resolution Program consists of a Mediation 
and Arbitration Process comprised of six parts, in addition to the 
Alternative Process. The six parts of the Mediation and Arbitration 
Process are: Initial Reporting of an Alleged Defect, Initiating Dispute 
Resolution, Intake and Screening, Mediation, Nonbinding Arbitration, 
and HUD Review. When the manufacturer, retailer, and installer agree 
that the homeowner is not responsible for causing the defect, they may 
elect to use the Alternative Process instead of the HUD Mediation and 
Arbitration Process. The parties would then engage in a neutral 
evaluation process of their own design. However, if the defect is not 
corrected or repaired, the homeowner has the right to invoke the HUD 
Mediation and Arbitration Process after 30 days have elapsed from the 
initiation of the Alternative Process.

IV. HUD Manufactured Home Dispute Resolution Program in HUD-
Administered States

    As noted previously, HUD will administer its dispute resolution 
program only in states that choose not to operate their own dispute 
resolution programs. The following discussion of the HUD-administered 
program will not apply in any state that provides satisfactory 
assurances that it has implemented its own qualifying dispute 
resolution program, and that certifies its program to HUD, as described 
in Section VI of this preamble.

A. Initial Reporting of an Alleged Defect

    Under the Act, alleged defects that can be referred to the dispute 
resolution program must be reported within the first year after the 
date of home installation. It is only alleged defects reported in the 
first year after the first installation that are covered under the HUD 
Manufactured Home Dispute Resolution Program. As used in HUD's 
Manufactured Home Dispute Resolution Program and this new part 3288, 
the term ``defect'' is defined to parallel its definition in the Act. 
Accordingly, the rule also makes clear that for the HUD Manufactured 
Home Dispute Resolution Program, the term ``defect'' includes each 
defect in the installation, construction, or safety of the home. 
Persons familiar with HUD's long-established program for manufactured 
home construction and safety standards are likely to be accustomed to 
using the term ``defect'' in a narrower way. In regulations 
implementing the historical aspects of HUD's manufactured home program, 
the term has been defined to encompass only construction and safety 
standards, and to exclude matters that involve significant health and 
safety issues. See the definition in Sec.  3282.7(j). For purposes of 
the HUD Manufactured Home Dispute Resolution Program, however, a defect 
is any problem in the performance, construction, components, or 
material of the home that renders the home or any part of it not fit 
for the ordinary use for which it was intended, including, but not 
limited to, a defect in the construction, safety, or installation of 
the home. The broader use of the term as it applies to rights and 
responsibilities established under this new part 3288, is distinguished 
from the term's historical use in part 3282.
    As previously discussed, alleged defects must be reported within 1 
year of the date of home installation to be eligible for the HUD 
Manufactured Home Dispute Resolution Program. The Department strongly 
encourages the parties and homeowners to seek to resolve disputes 
directly with the party or parties that they believe to be responsible 
for causing the alleged defect before invoking the HUD Manufactured 
Home Dispute Resolution Program. Nevertheless, any of the parties, and 
the homeowners, must report the existence of possible defects within 
the 1-year period in order to preserve the option of initiating the HUD 
Manufactured Home Dispute Resolution Program. The report may be made to 
the Department, any of the parties, or a State Administrative Agency. 
To be more flexible, the Department is permitting reports to be made to 
State Administrative Agencies in addition to the Department and the 
parties. The Department recommends that reports of alleged defects be 
made in writing, including, but not limited to,

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e-mail, written letter, certified mail, or fax. Reports are also 
permitted by telephone. A report of an alleged defect must, at a 
minimum, include a description of the alleged defect, the name of the 
homeowner, and the address of the home. Parties alleging defects are 
encouraged to send any written correspondence via certified mail, fax, 
e-mail or other method, so that there will be proof of date of 
delivery. After reporting an alleged defect, the reporting party or 
homeowner is encouraged to allow time for a satisfactory response 
before initiating the HUD Manufactured Home Dispute Resolution Program.

B. Initiating the Process

    Any party or a homeowner may initiate the HUD Mediation and 
Arbitration Process in a HUD-administered state by submitting a request 
for dispute resolution to the dispute resolution provider or by calling 
a toll-free number.

C. Intake and Screening

    When the request for dispute resolution has been received by the 
dispute resolution provider, the screening neutral will review the 
sufficiency of the information provided with the request. Although 
there is no specified time period established for the screening neutral 
to review the request for dispute resolution, as recommended by the 
MHCC and other commenters, it is HUD's intention to perform this task 
in a timely manner. If a defect is properly alleged and timely 
reported, notice of the request will be forwarded to the manufacturer, 
retailer, and installer by the screening neutral to the extent the 
appropriate parties can be identified based on the information in the 
request. If the screening neutral determines there is sufficient 
documentation of an alleged defect presenting an unreasonable risk of 
injury or death, a copy of the request will be sent to HUD. If a 
request is lacking any of the required information, the screening 
neutral will contact the requester or the parties to supplement the 
initial request. If information necessary to qualify the matter for the 
HUD Manufactured Home Dispute Resolution Program is not received within 
a reasonable time established by the screening neutral, the request for 
dispute resolution will be considered withdrawn. The Department 
anticipates establishing additional specific time periods for intake 
and screening as part of the contracting process with the third-party 
dispute resolution provider and publicizing these time periods on HUD's 
Web site http://www.hud.gov.

D. Mandatory Mediation

    The second stage in the process is mandatory mediation. The dispute 
resolution provider will select a mediator, who will be a different 
individual from the screening neutral used during the intake and 
screening process. The mediator will mediate the dispute and attempt to 
facilitate a settlement. The parties will be given 30 days from the 
commencement of the mediation to reach a settlement. For cases 
involving defects presenting an unreasonable risk of injury, death, or 
significant loss or damage to valuable personal property, the parties 
will have a maximum of 10 days from the commencement of the mediation 
to reach an agreement. The dispute resolution provider will notify the 
parties and the homeowner in writing of the date of the commencement of 
the mediation. Sample agreements will be made available to the parties 
as drafting guidance. Upon the parties reaching and signing an 
agreement, the mediator will forward copies of any settlements reached 
to the parties, the homeowner, and HUD. Except for the report of an 
alleged defect, any request for dispute resolution, and any written 
settlement agreement, all other documents and communications provided 
in confidence and used in the mediation will be confidential, in 
accordance with the Administrative Dispute Resolution Act of 1996 (5 
U.S.C. 571 et seq.). Once the settlement agreement is signed, the 
corrective repairs must be completed within 30 days, unless a longer 
period is agreed to by the homeowner and the parties.

E. Nonbinding Arbitration

    The third stage that may be invoked is nonbinding arbitration. If 
the parties fail to reach a settlement during mediation, a party or the 
homeowner may, within 15 days of the expiration of the time allowed for 
reaching a settlement, request nonbinding arbitration. The party or the 
homeowner requesting nonbinding arbitration will be required to submit 
a written request for arbitration to the dispute resolution provider. 
The dispute resolution provider will determine how an arbitrator will 
be selected for each case. The parties may request an in-person 
hearing, to be held at the discretion of the arbitrator, after 
considering factors such as cost. If such a request is not made by all 
parties within 5 days of the dispute resolution provider's receipt of 
the request for arbitration, the arbitrator may conduct either a record 
review or a telephonic hearing. The dispute resolution provider will 
issue a notice to the parties and the homeowner setting forth the date, 
place, and time the arbitration is to be held. If a party chooses not 
to participate in the arbitration, the process will continue without 
input from that party. The arbitrator will have the authority to issue 
requests for documentation and information necessary to complete the 
record, conduct on-site inspections, dismiss frivolous allegations, and 
set hearing dates and deadlines. The arbitrator will be required to 
complete the arbitration within 21 days of receipt of the request for 
arbitration, unless good cause is found by HUD. After conducting a 
hearing, the arbitrator will provide the parties and HUD with a written 
nonbinding recommendation as to who the responsible party or parties 
are and what actions should be taken. Several commenters, including the 
MHCC, proposed that the contents of the recommendation be made 
available to HUD and the parties simultaneously. The Department agrees 
and has restructured the Mediation and Arbitration Process accordingly. 
Several commenters, including the MHCC, stated that the parties should 
have the ability to enter into binding agreements of their choosing at 
any point in the process. Taking this into consideration, HUD has 
modified the procedures set out in the proposed rule. Under the final 
rule, at any time before HUD issues a final order, the parties may 
submit an offer of settlement to HUD that HUD may, at its discretion, 
incorporate into the order.

F. HUD Review

    The final stage of the process is HUD Review. After the arbitrator 
makes a recommendation, he or she will forward it to HUD. HUD will 
review the arbitrator's recommendation, the record, and any settlement 
offers. HUD will accept, modify, or reject the recommendation. Several 
commenters, including the MHCC, were opposed to HUD having the option 
to accept, modify, or reject the arbitrator's recommendation. HUD 
considers it appropriate for HUD to issue final enforceable orders and 
that this inherent governmental function cannot be delegated to a 
private party. It is HUD's obligation to issue an order that under the 
Administrative Procedure Act can withstand the arbitrary and capricious 
standard. When a defect is determined to be present, HUD will issue an 
appropriate order that assigns responsibility for correction of the 
defect. In the order for correction, HUD will include a date by which 
the correction of all defects must be completed, taking into 
consideration the

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seriousness of the defect. A party's failure to comply with an order of 
HUD will be considered a violation of section 610(a)(5) of the Act (42 
U.S.C. 5409(a)(5)).
    The responsible party or parties will be required to pay for or 
provide any repair of the home. HUD may apportion the costs for 
correction and repair if culpability rests with more than one party.

G. Alternative Process When Homeowners Are Not Responsible for the 
Defect

    Manufacturers, retailers, and installers who have been unable to 
resolve a dispute involving a defect among themselves and who certify 
that the homeowner is not responsible for the defect will have the 
option of electing to use an Alternative Process under the HUD 
Manufactured Home Dispute Resolution Program. The Alternative Process 
permits the parties to seek neutral evaluation outside of the 
procedures established by the HUD Mediation and Arbitration Process. To 
participate in the Alternative Process, at least one of the parties 
must submit a written notification to the dispute resolution provider 
after it has reported an alleged defect or has been informed that an 
alleged defect has been reported to another party. Parties must elect 
to use the Alternative Process no more than 7 days after notification 
of a request for dispute resolution has been delivered by overnight 
delivery, or commercial carrier, or by fax, to the screening neutral. 
Parties who elect to use the Alternative Process must agree to engage a 
neutral of their own selection. The selected neutral will evaluate the 
dispute and make an assignment of responsibility for correction and 
repair. The actual process followed will be designed and agreed to by 
the parties; there are no particular procedural requirements, such as 
witnesses or formal evidence. The parties may elect to memorialize the 
assignment of responsibility in writing and should agree to act upon 
the neutral's assignment of responsibility for correction and repair. 
The participants must agree to allow the homeowner or the homeowner's 
representative to be present at any meetings and to be informed of the 
outcome. The parties may inform the Department of the outcome. At any 
time after 30 days of the Alternative Process notification, any party 
or the homeowner may invoke the HUD Mediation and Arbitration Process 
and proceed to mediation by following the established procedures.

V. Informing Homeowners About Manufactured Home Dispute Resolution

    One key component of the HUD Manufactured Home Dispute Resolution 
Program is notifying homeowners about the availability of dispute 
resolution in HUD-administered states through the HUD Manufactured Home 
Dispute Resolution Program, and in all other states through state 
dispute resolution programs. Homeowners will be advised of the 
availability of the HUD Manufactured Home Dispute Resolution Program 
from retailers when purchasing a manufactured home. The rule requires 
retailers to provide each homeowner with a standard notice at the time 
of signing of a contract for the sale or lease of a manufactured home. 
This is consistent with numerous comments received from the MHCC and 
others opposed to the posting of a notice in each home, but favoring a 
standard notice to be provided at or before the signing of the sales 
contract.
    The Department will notify the public about the HUD Manufactured 
Home Dispute Resolution Program through the Consumer Manual that 42 
U.S.C. 5416 and 24 CFR 3282.207 currently require be provided with each 
manufactured home. The manufacturer will be required to include in the 
Consumer Manual the specific language that is set out in the revised 
Sec.  3282.207 in this rule. The language gives detailed information 
about the HUD program.

VI. State Dispute Resolution Programs in Non-HUD-Administered States

    The HUD Manufactured Home Dispute Resolution Program will not be 
implemented in states that are certified by HUD and have dispute 
resolution programs that comply with the minimum requirements set out 
in these regulations. These states will administer their own dispute 
resolution programs. A state dispute resolution program will be 
required to meet criteria listed in a certification form. However, the 
final rule does not specify how the criteria are to be met. Comments 
from the MHCC and others strongly supported redefining HUD's proposed 
state requirements for certification. Those commenters were in favor of 
having the state requirements parallel the statutory requirements. 
Additionally, those commenters noted that some states have already 
implemented programs that closely model the statutory requirements. The 
proposed rule included six requirements for full certification and five 
for conditional approval. In response to the comments, HUD has reduced 
the minimum requirements for full certification to four, and to three 
for conditional approval. The proposed rule also required that states 
allow homeowners to initiate complaints. Comments from the MHCC and 
others recommended that this requirement be removed. HUD has changed 
the certification form to allow states flexibility when operating their 
own programs and to give them the ability to design programs that 
closely model the statutory requirements. The minimum requirements for 
certification are set forth in Part II of the Dispute Resolution 
Certification attached as an appendix, and include provisions for: (1) 
The timely resolution of disputes regarding responsibility for 
correction and repair of defects in manufactured homes involving 
manufacturers, retailers, or installers; (2) provisions for issuance of 
appropriate orders for correction and repairs of defects in the homes; 
(3) a coverage period for disputes involving defects that are reported 
within a minimum of 1 year from the date beginning on the date of first 
installation; and (4) adequate funding and personnel. Any state that 
certifies that its program meets these four minimum requirements will 
be accepted and permitted to implement its own program. A state that 
meets three of the four minimum requirements under Sec.  3288.205(a)(1) 
through (4) will be conditionally approved by HUD.
    HUD recognizes that some states may have a different definition of 
``defect'' or use a different threshold for its program than the one 
set forth in these regulations for the HUD program. For purposes of 
state certification, this rule provides for state approval if the 
threshold for the program is functionally equivalent to the federal 
definition of ``defect.''

VII. Role of the Manufactured Housing Consensus Committee in Future 
Revisions of This Regulation

    Several commenters expressed a desire to have the Department work 
closely with the MHCC in future rulemaking for the dispute resolution 
program. Such involvement is not specifically provided for in the Act. 
However, HUD provides in this rule for the MHCC's input prior to 
publication of any new dispute resolution rulemaking initiated by HUD. 
This rule also provides that the MHCC may initiate its own 
recommendations for HUD regarding dispute resolution regulations, and 
that HUD will explain to the MHCC any modification or rejection by HUD 
of the MHCC recommendations.

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VIII. Conforming Amendments

    As stated in the October 20, 2005, proposed rule, since HUD is 
using the term ``manufactured home'' in this rule, it is taking this 
opportunity to correct the definition in 24 CFR 3280.2 by adding the 
reference to self-propelled vehicles found in section 603(6) of the Act 
(42 U.S.C. 5402(6)). HUD is also clarifying the methodology for the 
calculation of square footage that is included in the current 
regulatory definition. This action will result in consistent usage of 
the term for all parts of the manufactured home program. The definition 
in this final rule is unchanged from the definition that appeared in 
the proposed rule.

IX. Changes to the Proposed Rule in This Final Rule

    The following changes to the October 20, 2005, proposed rule are 
made by this final rule, consistent with the discussion of public 
comments in this preamble and as further explained below:
    1. To provide consistency in this rule with the terminology used in 
other HUD regulations, the term ``manufactured home'' rather than 
``manufactured housing'' is used, and references to ``HUD'' have been 
substituted for references to ``the Secretary.''
    2. While this final rule gives homeowners the right to participate 
in the HUD Dispute Resolution Program by initiating the Mediation and 
Arbitration Process and by acting as observers of the process, it does 
not recognize homeowners as parties.
    3. A statement has been added to the dispute resolution language 
required in the consumer manual by Sec.  3280.2(e) that the HUD Dispute 
Resolution Program does not replace any manufacturer's warranty 
program.
    4. A definition of the term ``installer'' has been added to the 
list of definitions at Sec.  3288.3.
    5. The rule at Sec.  3288.5 requires retailers to provide each 
homeowner with a standard notice at the time of signing of a contract 
for the sale or lease of a manufactured home, rather than the posting 
of a notice in each home.
    6. The rule at Sec.  3288.15(b) now permits reports of defects to 
be made to State Administrative Agencies in addition to the Department 
and the parties.
    7. A provision is added at Sec.  3288.30(c) that denial of a 
dispute by all of the parties that there is a dispute does not preclude 
the dispute resolution process from going forward to mediation. A 
provision is also added at Sec.  3288.35(c) that, during mediation, 
denial of a dispute by all parties without acceptance of responsibility 
will result in the mediator referring the matter to arbitration for 
determination of the defect and responsibility for the defect. A 
similar provision is added at Sec.  3288.40(d), that if the parties 
deny a dispute exists and the arbitrator determines there is a defect, 
the arbitrator will make a determination of responsibility for the 
defect. These additions protect the homeowner's right to have the 
existence of, and responsibility for, any alleged defect determined 
through the HUD Manufactured Home Dispute Resolution Program in HUD-
administered states in the event existence of a dispute is denied by 
all of the parties without determination of the defect and of 
responsibility for the defect.
    8. A procedure cited in the preamble of the proposed rule (at 70 FR 
61180), that if the screening neutral determines there is sufficient 
documentation of an alleged defect presenting an unreasonable risk of 
injury or death, a copy of the request will be sent to HUD, is 
explicitly added to this rule at Sec.  3288.30(d). Similarly, a 
procedure cited in the preamble of the proposed rule (at 70 FR 61180), 
to make sample agreements available to the mediation parties as 
drafting guidance, is included in the final rule at Sec.  
3288.35(d)(2).
    9. Section 3288.40(c) makes explicit the arbitrator's authority to 
make proposed findings of the presence of a defect and culpability.
    10. An extension of the 21-day time period by which the arbitrator 
is required to complete the arbitration is now permitted for good cause 
under Sec.  3288.40(h).
    11. Under Sec.  3288.40(h), the contents of the arbitrator's 
recommendation are to be made available to HUD and the parties 
simultaneously, rather than only to HUD as was stated in the proposed 
rule.
    12. The final rule, at Sec.  3288.40(i), allows the parties to 
submit an offer of settlement to HUD at any time before a final order 
is issued that HUD may, at HUD's discretion, incorporate into the 
order.
    13. For the alternate dispute resolution procedure of subpart C, 
the term ``Alternative Process'' has been substituted for ``Commercial 
Opt-Out Option.''
    14. In Sec.  3288.205(a), the final rule has reduced the minimum 
requirements for full certification from six to four, and from five to 
three for conditional approval. The proposed requirements dealing with 
homeowner initiation of the process and conflict of interest have been 
removed.
    15. A new subpart E has been added to address the role of the MHCC 
in Dispute Resolution Program rulemaking procedures.

X. Findings and Certifications

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866 (entitled ``Regulatory Planning and Review''). 
OMB determined that this rule is a ``significant regulatory action'' as 
defined in section 3(f) of the Order (although not an economically 
significant regulatory action under the Order). The docket file is 
available for public inspection in the Regulations Division, Office of 
General Counsel, Department of Housing and Urban Development, 451 
Seventh Street, SW., Room 10276, Washington, DC 20410-0500. Due to 
security measures at the HUD Headquarters building, please schedule an 
appointment to review the docket file by calling the Regulations 
Division at (202) 708-3055 (this is not a toll-free number).

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been approved by OMB under the Paperwork Reduction Act of 1995 (44 
U.S.C. 3501-3520) and assigned OMB control number 2502-0562. In 
accordance with the Paperwork Reduction Act, HUD may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information, unless the collection displays a currently valid OMB 
control number.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. This rule, which implements a 
statutory mandate to establish a program for the resolution of a narrow 
category of disputes, will not impose any federal mandates on any 
state, local, or tribal government or the private sector within the 
meaning of the Unfunded Mandates Reform Act of 1995.

Environmental Review

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured

[[Page 27227]]

housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
final rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Impact on Small Entities

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a substantial number of small 
entities.
    HUD has conducted a labor and travel cost impact analysis for this 
rule. The cost analysis determines the cost difference between a 
typical dispute resolution process (the process) involving manufactured 
housing and the civil litigation costs between one or more parties 
involved in a manufactured housing dispute. A typical dispute 
resolution method is a two-step process: mediation and, for a small 
percent of unsuccessful mediation cases, arbitration.
    The potential cost impact of the mediation step for manufacturers 
would be approximately $1,550 per dispute, $237 for retailers, and $177 
for installers. HUD anticipates that it may be administering the 
dispute resolution process in 26 states where approximately 37,800 
homes are expected to be installed annually. Currently, 45 
manufacturing corporate entities ship into those states, while 1,719 
retailers sell homes and approximately 5,000 individuals or businesses 
install manufactured homes in those states.
    Based on the preceding data, HUD anticipates taking action on 1,890 
complaints under the federal manufactured home dispute resolution 
process during an average year. Presuming that the average cost of this 
action ($1,964) will be incorporated into the home price or related 
service fees of every installed home in the 26 states (37,800), the 
cost impact to each installed home would be $98.
    If all 1,890 cases were settled through litigation rather than 
dispute resolution, the cost of litigating 1,890 cases would total 
$18.9 million. Averaged across 37,800 homes, the average cost of 
litigation incorporated into each home price would be $500 per home, 
compared to the average cost of dispute resolution of $98 per home. 
Dispute resolution would, therefore, provide an average savings of $402 
per home.
    Several commenters claimed that the number of complaints was not 
properly substantiated and was unrealistically low. However, these 
numbers were developed by carefully sampling 12 current state dispute 
resolution programs. Furthermore, the Small Business Administration has 
accepted these estimates while none of the commenters supplied any 
numbers of their own. Some commenters also complained that the cost 
estimate provided by HUD runs only through the mediation phase. While 
this is true, HUD's research, which was again based on current state 
program experience, determined that the number of disputes requiring 
arbitration would be minimal.
    The small increase in total cost associated with this final rule 
would not impose a significant burden for a small business. The rule 
would regulate establishments primarily engaged in the production of 
manufactured homes (NAICS 32991) and the sale of manufactured homes 
(NAICS 453930). In addition, manufactured home set-up and tie-down 
establishments (installers) would be included within the definition of 
all other special trade contractors (NAICS 23599). Of the 222 firms 
included under the NAICS 32991 definition, 198 are small manufacturers, 
which fall below the small business threshold of 500 employees. There 
are 10,691 retailers included under NAICS 453930; all of the firms fall 
below the $11 million annual income rate. Of the 31,320 firms included 
under NAICS 23599 definitions, only 53 firms exceed the small business 
threshold of 500 employees and none of these is primarily a 
manufactured home set-up and tie-down establishment. The rule, 
therefore, would affect a substantial number of small entities. 
However, the home manufacturers, retailers, and installers would be 
subject only to an associated labor cost and travel expense necessary 
to attend the mediation process and labor costs to participate in the 
expected record review and possible telephonic or face-to-face meeting 
for arbitration. Moreover, because the great majority of manufacturers, 
retailers, and installers are considered small entities, there would 
not be any disproportionate impact on them. Therefore, although this 
rule would affect a substantial number of small entities, it would not 
have a significant economic impact on them. In addition, the speedier 
and more certain resolution of disputes should help the affected 
businesses.
    Accordingly, the undersigned certifies that this final rule would 
not have a significant economic impact on a substantial number of small 
entities.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive Order. State and local 
governments are not required to establish dispute resolution programs, 
but the rule provides a mechanism to recognize state programs that meet 
the statutory elements of a dispute resolution program to operate in 
lieu of the federal manufactured home dispute resolution program.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for Manufactured 
Housing is 14.171.

List of Subjects

24 CFR Part 3280

    Housing standards, Incorporation by reference, Manufactured homes.

24 CFR Part 3282

    Administrative practice and procedure, Consumer protection, 
Intergovernmental relations, Investigations, Manufactured homes, 
Reporting and recordkeeping requirements, Warranties.

24 CFR Part 3288

    Administrative practice and procedure, Consumer protection, 
Intergovernmental relations, Manufactured homes, Reporting and 
recordkeeping requirements.


0
Accordingly, HUD amends parts 3280 and 3282 and adds a new part 3288 in 
chapter XX of title 24 of the Code of Federal Regulations to read as 
follows:

PART 3280--MANUFACTURED HOME CONSTRUCTION AND SAFETY STANDARDS

0
1. The authority citation for part 3280 continues to read as follows:

    Authority: 42 U.S.C. 3535(d), 5403, and 5424.


[[Page 27228]]



0
2. In Sec.  3280.2, the definition of ``manufactured home'' is revised 
to read as follows:


Sec.  3280.2  Definitions.

* * * * *
    Manufactured home means a structure, transportable in one or more 
sections, which in the traveling mode is 8 body feet or more in width 
or 40 body feet or more in length or which when erected on-site is 320 
or more square feet, and which is built on a permanent chassis and 
designed to be used as a dwelling with or without a permanent 
foundation when connected to the required utilities, and includes the 
plumbing, heating, air-conditioning, and electrical systems contained 
in the structure. This term includes all structures that meet the above 
requirements except the size requirements and with respect to which the 
manufacturer voluntarily files a certification pursuant to Sec.  
3282.13 of this chapter and complies with the construction and safety 
standards set forth in this part 3280. The term does not include any 
self-propelled recreational vehicle. Calculations used to determine the 
number of square feet in a structure will include the total of square 
feet for each transportable section comprising the completed structure 
and will be based on the structure's exterior dimensions measured at 
the largest horizontal projections when erected on site. These 
dimensions will include all expandable rooms, cabinets, and other 
projections containing interior space, but do not include bay windows. 
Nothing in this definition should be interpreted to mean that a 
manufactured home necessarily meets the requirements of HUD's Minimum 
Property Standards (HUD Handbook 4900.1) or that it is automatically 
eligible for financing under 12 U.S.C. 1709(b).
* * * * *

PART 3282--MANUFACTURED HOME PROCEDURAL AND ENFORCEMENT REGULATIONS

0
3. The authority citation for part 3282 is revised to read as follows:

    Authority: 28 U.S.C. 2461 note; 42 U.S.C. 3535(d) and 5424.


0
4. In Sec.  3282.207, redesignate paragraph (e) as paragraph (f), add a 
new paragraph (e), and revise the second sentence of paragraph (f) as 
redesignated, to read as follows:


Sec.  3282.207  Manufactured home consumer manual requirements.

* * * * *
    (e) Dispute resolution information. (1) The manufacturer must 
include the following language under a heading of ``Dispute Resolution 
Process'' in the consumer manual:

    Many states have a consumer assistance or dispute resolution 
program that homeowners may use to resolve problems with 
manufacturers, retailers, or installers concerning defects in their 
manufactured homes that render part of the home unfit for its 
intended use. Such state programs may include a process to resolve a 
dispute among a manufacturer, a retailer, and an installer about who 
will correct the defect. In states where there is not a dispute 
resolution program that meets the federal requirements, the HUD 
Manufactured Home Dispute Resolution Program will operate. These are 
``HUD-administered states.'' The HUD Manufactured Home Dispute 
Resolution Program is not for cosmetic or minor problems in the 
home. You may contact the HUD Manufactured Housing Program Office at 
(202) 708-6423 or (800) 927-2891, or visit the HUD website at 
www.hud.gov to determine whether your state has a state program or 
whether you should use the HUD Manufactured Home Dispute Resolution 
Program. Contact information for state programs is also available on 
the HUD website. If your state has a state program, please contact 
the state for information about the program, how it operates, and 
what steps to take to request dispute resolution. When there is no 
state dispute resolution program, a homeowner may use the HUD 
Manufactured Home Dispute Resolution Program to resolve disputes 
among the manufacturer, retailer, and installer about responsibility 
for the correction or repair of defects in the manufactured home 
that were reported during the 1-year period starting on the date of 
installation. Even after the 1-year period, manufacturers have 
continuing responsibility to review certain problems that affect the 
intended use of the manufactured home or its parts, but for which 
correction may no longer be required under federal law.

    (2) The manufacturer must include the following language under a 
heading of ``Additional Information `` HUD Manufactured Home Dispute 
Resolution Program'' in the consumer manual:

    The steps and information outlined below apply only to the HUD 
Manufactured Home Dispute Resolution Program that operates in HUD-
administered states, as described under the heading ``Dispute 
Resolution Information'' in this manual. Under the HUD Manufactured 
Home Dispute Resolution Program, homeowners must report defects to 
the manufacturer, retailer, installer, a State Administrative 
Agency, or HUD within 1 year after the date of the first 
installation. Homeowners are encouraged to report defects in 
writing, including, but not limited to, email, written letter, 
certified mail, or fax, but they may also make a report by 
telephone. To demonstrate that the report was made within 1 year 
after the date of installation, homeowners should report defects in 
a manner that will create a dated record of the report: for example, 
by certified mail, by fax, or by email. When making a report by 
telephone, homeowners are encouraged to make a note of the phone 
call, including names of conversants, date, and time. No particular 
format is required to submit a report of an alleged defect, but any 
such report should at a minimum include a description of the alleged 
defect, the name of the homeowner, and the address of the home.
    Homeowners are encouraged to send reports of an alleged defect 
first to the manufacturer, retailer, or installer of the 
manufactured home, or a State Administrative Agency. Reports of 
alleged defects may also be sent to HUD at: HUD, Office of 
Regulatory Affairs and Manufactured Housing, Attn: Dispute 
Resolution, 451 Seventh Street, SW., Washington, DC 20410-8000; 
faxed to (202) 708-4213; e-mailed to [email protected], or reported 
telephonically at (202) 708-6423 or (800) 927-2891.
    If, after taking the steps outlined above, the homeowner does 
not receive a satisfactory response from the manufacturer, retailer, 
or installer, the homeowner may file a dispute resolution request 
with the dispute resolution provider in writing, or by making a 
request by phone. No particular format is required to make a request 
for dispute resolution, but the request should generally include the 
following information:
    (1) The name, address, and contact information of the homeowner;
    (2) The name and contact information of the manufacturer, 
retailer, and installer of the manufactured home;
    (3) The date or dates the report of the alleged defect was made;
    (4) Identification of the entities or persons to whom each 
report of the alleged defect was made and the method that was used 
to make the report;
    (5) The date of installation of the manufactured home affected 
by the alleged defect; and
    (6) A description of the alleged defect.
    Information about the dispute resolution provider and how to 
make a request for dispute resolution is available at http://www.hud.gov or by contacting the Office of Manufactured Housing 
Programs at (202) 708-6423 or (800) 927-2891.
    A screening agent will review the request and, as appropriate, 
forward the request to the manufacturer, retailer, installer, and 
mediator. The mediator will mediate the dispute and attempt to 
facilitate a settlement. The parties to a settlement include, as 
applicable, the manufacturer, retailer, and installer. If the 
parties are unable to reach a settlement that results in correction 
or repair of the alleged defect, any party or the homeowner may 
request nonbinding arbitration. Should any party refuse to 
participate, the arbitration shall proceed without that party's 
input. Once the arbitrator makes a non-binding recommendation, the 
arbitrator will forward it to the parties and HUD. HUD will have the 
option of adopting, modifying, or rejecting the recommendation when 
issuing an order requiring the responsible party or parties to make 
any corrections or repairs in the home. At any time before HUD 
issues a final order, the parties may submit an offer of settlement

[[Page 27229]]

to HUD that may, at HUD's discretion, be incorporated into the 
order.
    In circumstances where the parties agree that one or more of 
them, and not the homeowner, is responsible for the alleged defect, 
the parties will have the opportunity to resolve the dispute outside 
of the HUD Mediation and Arbitration process by using the 
Alternative Process. Homeowners will maintain the right to be 
informed in writing of the outcome when the Alternative Process is 
used, within 5 days of the outcome. At any time after 30 days of the 
Alternative Process notification, any participant or the homeowner 
may invoke the HUD Manufactured Home Dispute Resolution Program and 
proceed to mediation.
    The HUD Manufactured Home Dispute Resolution Program is not a 
warranty program and does not replace the manufacturer's or any 
other warranty program.

    (f) * * * A manual substantially complies with the guidelines if it 
includes the language in paragraph (e) of this section and presents 
current material on each of the subjects covered in the guidelines in 
sufficient detail to inform consumers about the operation, maintenance, 
and repair of manufactured homes.* * *

0
5. In chapter XX, add a new part 3288, to read as follows:

PART 3288--MANUFACTURED HOME DISPUTE RESOLUTION PROGRAM

Subpart A--General
Sec.
3288.1 Purpose and scope.
3288.3 Definitions.
3288.5 Retailer notification at sale.
Subpart B--HUD Manufactured Home Dispute Resolution Program in HUD-
Administered States
3288.10 Applicability.
3288.15 Eligibility for dispute resolution.
3288.20 Reporting a defect.
3288.25 Initiation of dispute resolution.
3288.30 Screening of dispute resolution request.
3288.33 Notice of dispute resolution.
3288.35 Mediation.
3288.40 Nonbinding arbitration.
3288.45 HUD review and order.
Subpart C--Alternative Process in HUD-Administered States
3288.100 Scope and applicability.
3288.105 Time when Alternative Process is available.
3288.110 Alternative Process agreements.
Subpart D--State Dispute Resolution Programs in Non-HUD-Administered 
States
3288.200 Applicability.
3288.205 Minimum requirements.
3288.210 Acceptance and recertification process.
3288.215 Effect on other manufactured home program requirements.
Subpart E--Dispute Resolution Program Rulemaking Procedures
3288.300 Applicability.
3288.305 Consultation with the Manufactured Housing Consensus 
Committee.

    Authority: 42 U.S.C. 3535(d), 5422 and 5424.

Subpart A--General


Sec.  3288.1  Purpose and scope.

    (a) Purpose. The Act is intended, in part, to protect the quality, 
safety, durability, and affordability of manufactured homes. Section 
623(c)(12) of the Act (42 U.S.C. 5422 (c)(12)) requires the 
implementation of ``a dispute resolution program for the timely 
resolution of disputes between manufacturers, retailers, and installers 
of manufactured homes regarding responsibility, and for the issuance of 
appropriate orders, for the correction or repair of defects in 
manufactured homes that are reported during the 1-year period beginning 
on the date of installation.'' The purpose of this part is to provide a 
dispute resolution program for the timely resolution of disputes among 
manufacturers, retailers, and installers regarding the responsibility 
for correction or repair of defects reported by the homeowner or others 
and reported in the 1-year period after the first installation of the 
manufactured home.
    (b) Scope-- (1) Applicability. In carrying out this purpose, it is 
presumed that if a manufactured home contains an alleged defect that is 
reported in the first year after installation and was not caused by the 
homeowner, then the manufacturer, retailer, or installer is responsible 
for the alleged defect and the dispute resolution process recognized in 
this part is an appropriate means for resolving disputes about 
responsibility for correction and repair of the alleged defect. For 
purposes of the dispute resolution process recognized in this part, 
only alleged defects reported in the first year after the first 
installation are covered by the process. The state where the home is 
sited determines whether the HUD Manufactured Home Dispute Resolution 
Program or a state program applies. Subpart A of this part establishes 
general provisions applicable to HUD's implementation of a dispute 
resolution program as required by the Act. Subpart B of this part 
establishes the HUD Manufactured Home Dispute Resolution Program that 
HUD will administer in any state that does not establish a program that 
complies with the Act and been accepted by HUD as provided in subpart D 
of this part. Subpart C of this part provides an Alternative Process 
for manufacturers, retailers, and installers who agree that a homeowner 
is not responsible for the alleged defect to resolve their disputes 
about responsibility for correction or repair outside of the HUD 
Mediation and Arbitration Process under subpart B. Subpart D of this 
part establishes the minimum requirements that must be met by a state 
applying to implement its own dispute resolution program that complies 
with the Act, and the procedure for determining whether the 
requirements for complying have been met. Subpart E of this part 
establishes special rulemaking procedures that apply to the issuance of 
new regulations that implement the dispute resolution requirements set 
forth in section 623 of the Act (42 U.S.C. 5422).
    (2) Warranties not affected. This part is not a warranty program 
and the requirements established in this part do not replace the 
manufacturer's or any other warranty program. Such warranty program may 
have its own requirements.


Sec.  3288.3  Definitions.

    The following definitions apply in this part:
    Act means the National Manufactured Housing Construction and Safety 
Standards Act of 1974, 42 U.S.C. 5401-5426.
    Appropriate order means an order issued by HUD or an order that is 
enforceable under state law.
    Date of installation means the date all utilities are connected and 
the manufactured home is ready for occupancy as established, if 
applicable, by a certificate of occupancy, except as follows: if the 
manufactured home has not been sold to the first person purchasing the 
home in good faith for purposes other than resale by the date the home 
is ready for occupancy, the date of installation is the date of closing 
under the purchase agreement or sales contract for the manufactured 
home.
    Day means a calendar day.
    Defect means any defect in the performance, construction, 
components, or material of a manufactured home that renders the home or 
any part of the home not fit for the ordinary use for which it was 
intended, including, but not limited to, a defect in the construction, 
safety, or installation of the home. For purposes of state 
certification under Sec.  3288.205, HUD will find it acceptable if the 
threshold for the state's program is functionally equivalent to this 
definition.
    Dispute resolution provider means a person or entity providing 
dispute resolution services for HUD.

[[Page 27230]]

    Homeowner means a person who purchased or leased the manufactured 
home in good faith for purposes other than resale.
    HUD means the U.S. Department of Housing and Urban Development.
    Installer means the person who is retained to engage in, or who 
engages in, the business of directing, supervising, controlling, or 
correcting the initial installation of a manufactured home.
    Manufactured home has the same meaning as the term ``manufactured 
home'' as defined in 24 CFR 3280.2.
    Manufactured Housing Consensus Committee or MHCC means the 
consensus committee established pursuant to section 604(a)(3) of the 
Act, 42 U.S.C. 5403(a)(3).
    Party or parties means, individually or collectively, the 
manufacturer, retailer, or installer of a manufactured home in which a 
defect has been reported in accordance with Sec.  3288.20.
    State Administrative Agency means an agency of a state that has 
been approved or conditionally approved to carry out the state plan for 
enforcement of the standards pursuant to section 623 of the Act, 42 
U.S.C. 5422.
    Timely reporting means the reporting of an alleged defect within 1 
year after the date of installation of a manufactured home in 
accordance with Sec.  3288.20.
    Timely resolution means the resolution of disputes among 
manufacturers, retailers, and installers within 120 days of the time a 
request for dispute resolution is made, except that if the defect 
presents an unreasonable risk of injury, death, or significant loss or 
damage to valuable personal property, the resolution must be within 60 
days of the time a request for dispute resolution is made.


Sec.  3288.5  Retailer notification at sale.

    Retailer notice at the time of signing. At the time of signing a 
contract for sale or lease for a manufactured home, the retailer must 
provide the purchaser with a retailer notice. This notice may be in a 
separate document from the sales contract or may be incorporated 
clearly in a separate section on consumer dispute resolution 
information at the top of the sales contract. The notice must include 
the following language:

    The U.S. Department of Housing and Urban Development (HUD) 
Manufactured Home Dispute Resolution Program is available to resolve 
disputes among manufacturers, retailers, or installers concerning 
defects in manufactured homes. Many states also have a consumer 
assistance or dispute resolution program. For additional information 
about these programs, see sections titled ``Dispute Resolution 
Process'' and ``Additional Information--HUD Manufactured Home 
Dispute Resolution Program'' in the Consumer Manual required to be 
provided to the purchaser. These programs are not warranty programs 
and do not replace the manufacturer's, or any other person's, 
warranty program.

Subpart B--HUD Manufactured Home Dispute Resolution Program in HUD-
Administered States


Sec.  3288.10  Applicability.

    The requirements of the HUD Manufactured Home Dispute Resolution 
Program established in this subpart B apply in each state that does not 
establish a state dispute resolution program that complies with the Act 
and has been accepted by HUD as provided in subpart D of this part.


Sec.  3288.15  Eligibility for dispute resolution.

    (a) Initiation of actions. Manufacturers, retailers, and installers 
of manufactured homes are eligible to initiate and participate in the 
HUD Manufactured Home Dispute Resolution Program. Homeowners may 
initiate action under, and be observers to, the HUD Manufactured Home 
Dispute Resolution Program.
    (b) Eligible disputes. Only disputes concerning alleged defects 
that have been reported to the manufacturer, retailer, installer, HUD, 
or a State Administrative Agency within 1 year after the date of the 
first installation of the manufactured home are eligible for resolution 
through the HUD Manufactured Home Dispute Resolution Program. The 
eligible dispute includes the defect alleged in a timely report and any 
related issues.


Sec.  3288.20  Reporting a defect.

    (a) Making a report. To preserve the right to request dispute 
resolution through HUD, alleged defects must be reported to the 
manufacturer, retailer, installer, HUD, or a State Administrative 
Agency. An alleged defect may be reported by a homeowner, manufacturer, 
retailer, or installer.
    (b) Form of report. It is recommended that alleged defects be 
reported in writing, including, but not limited to, e-mail, written 
letter, certified mail, or fax. The existence of an alleged defect may 
also be reported by telephone.
    (c) Content of report. No particular form or format is required to 
report an alleged defect, but any such report must, at a minimum, 
include a description of the alleged defect, the name of homeowner, and 
the address of the home.
    (d) Record of report--(1) To evidence timeliness. To establish 
timely reporting, the report of an alleged defect that is made to the 
manufacturer, retailer, installer, or a State Administrative Agency of 
the manufactured home should be done in a manner that will create a 
dated record of the report that demonstrates that the report was made 
within 1 year after the date of installation; for example, by certified 
mail, fax, or email. Persons who report an alleged defect by telephone 
should make a contemporaneous note of the telephone call, including 
date, time, the name of the person who received the report, the name of 
the business contacted, and the telephone number called. If the matter 
goes to arbitration, the arbitrator and HUD will review whether there 
is sufficient evidence to believe the report was made on a timely 
basis.
    (2) Obligation to retain. Each report of a defect, including logs 
of telephonic complaints, received by a manufacturer, retailer, a State 
Administrative Agency or installer, must be maintained for 3 years from 
the date of receipt.
    (e) Reports made to a State Administrative Agency. Reports of 
defects in the manufactured home that are made in the first year after 
its installation can be sent to the appropriate State Administrative 
Agency. Contact information about a State Administrative Agency is 
available at http://www.hud.gov. Contact the appropriate State 
Administrative Agency to determine the method for making the report.
    (f) Reports made to HUD. Reports of alleged defects in the 
manufactured home that are made in the first year after its 
installation can be sent to HUD. The report to HUD may be made using 
any of the following methods:
    (1) In writing at: HUD, Office of Regulatory Affairs and 
Manufactured Housing, Attn: Dispute Resolution, 451 Seventh Street, 
SW., Washington, DC 20410-8000;
    (2) By telephone at: (202) 708-6423 or (800) 927-2891;
    (3) By fax at: (202) 708-4213; or
    (4) By e-mail at [email protected].
    (g) Effect of report. The reporting of an alleged defect does not 
initiate the HUD Manufactured Home Dispute Resolution Program, but only 
establishes whether the requirement of timely reporting in accordance 
with Sec.  3288.15(b) has been met. The HUD Manufactured Home Dispute 
Resolution Process is initiated when a request for dispute resolution 
is submitted to HUD in accordance with Sec.  3288.25.


Sec.  3288.25  Initiation of dispute resolution.

    (a) Preliminary effort. HUD strongly encourages the homeowner or 
party reporting an alleged defect to seek to

[[Page 27231]]

resolve the dispute directly with any manufacturer, retailer, or 
installer that the person reporting the defect believes to be 
responsible before initiating the HUD dispute resolution process.
    (b) Request for dispute resolution. Any of the parties or the 
homeowner may initiate the HUD Manufactured Home Dispute Resolution 
Program at any time after an alleged defect has been reported, by 
requesting dispute resolution, as follows:
    (1) By mailing, e-mailing, or otherwise delivering a written 
request for dispute resolution to the dispute resolution provider at 
the address or e-mail address provided either at http://www.hud.gov, or 
by contacting HUD's Office of Regulatory Affairs and Manufactured 
Housing at (202) 708-6423 or (800) 927-2891;
    (2) By faxing a request for dispute resolution to the fax number 
provided either at http://www.hud.gov, or by contacting HUD's Office of 
Regulatory Affairs and Manufactured Housing at (202) 708-6423 or (800) 
927-2891; or
    (3) By telephoning a request for dispute resolution to the number 
provided either at http://www.hud.gov, or by contacting HUD's Office of 
Regulatory Affairs and Manufactured Housing at (202) 708-6423 or (800) 
927-2891.
    (c) Requested information. The dispute resolution provider will 
request at least the following information when a person seeks to 
initiate dispute resolution under the HUD Manufactured Home Dispute 
Resolution Program:
    (1) The name, address, and contact information of the homeowner;
    (2) The name and contact information of the manufacturer, retailer, 
and installer of the manufactured home, to the extent available;
    (3) The date the report of the alleged defect was made;
    (4) The name and contact information of the recipient or recipients 
of the report of the alleged defect;
    (5) The date of installation of the manufactured home affected by 
the alleged defect; and
    (6) A description of the alleged defect.


Sec.  3288.30  Screening of dispute resolution request.

    (a) Review for sufficiency. When the request for dispute resolution 
has been received by the dispute resolution provider, a screening 
neutral will review the sufficiency of the information provided in the 
request for dispute resolution and determine if the dispute resolution 
process should proceed. If the screening neutral determines that a 
defect is properly alleged and timely reported, notice of the request 
will be forwarded, as provided in Sec.  3288.33, to the manufacturer, 
retailer, and installer, as appropriate and to the extent the 
appropriate parties can be identified based on the information in the 
request.
    (b) Insufficient information. If a request for dispute resolution 
is lacking any information necessary to determine if the dispute 
resolution process should proceed, the screening neutral will contact 
the requester or the parties about supplementing the initial request. 
If information necessary to qualify the matter for the HUD Manufactured 
Home Dispute Resolution Program is not received within a reasonable 
time established by the screening neutral, the request for dispute 
resolution will be considered withdrawn.
    (c) Denial of a dispute. Denial by all of the parties that there is 
a dispute does not preclude the dispute resolution process from going 
forward to mediation. A screening neutral's determination that a defect 
is properly alleged is prima facie evidence of a dispute. If the defect 
has not been corrected or repaired, the matter will be referred to 
mediation.
    (d) Determination of unreasonable risk. If the screening neutral 
determines there is sufficient documentation of an alleged defect 
presenting an unreasonable risk of injury or death, he or she will send 
a copy of the request to HUD.


Sec.  3288.33  Notice of dispute resolution.

    (a) Once the screening neutral determines that a defect is properly 
alleged and timely reported, notice about the request will be forwarded 
to the parties by overnight delivery, commercial carrier, or fax.
    (b) If the parties have not initiated the Alternative Process in 
accordance with Sec.  3288.105 of this part within 7 days of the 
screening neutral's notification, the screening neutral will refer the 
matter to mediation.


Sec.  3288.35  Mediation.

    (a) Mediator. The dispute resolution provider will provide for the 
selection of a mediator. The selected mediator will not be the person 
who screened the dispute resolution request. The selected mediator will 
mediate the dispute and attempt to facilitate a settlement. If a party 
identifies any other party that should be included in the mediation, 
the mediator will contact the other party and provide information about 
the scheduled mediation meetings.
    (b) Time--(1) For reaching settlement. Except as provided in 
paragraph (b)(2) of this section, the parties are allowed 30 days from 
the commencement of the mediation to reach a mediated settlement. In 
every case, the dispute resolution provider will notify the parties and 
the homeowner, in writing, of the date of the commencement of the 
mediation.
    (2) Alleged defects presenting an unreasonable risk of injury, 
death, or significant loss or damage to valuable personal property. For 
mediations involving alleged defects that appear to present an 
unreasonable risk of injury, death, or significant loss or damage to 
valuable personal property as determined by the screening neutral, the 
parties have a maximum 10 days from the commencement of the mediation 
to reach a settlement.
    (3) For corrective repairs. Unless a longer period is agreed to in 
writing by the parties to the mediated settlement and the homeowner, 
corrective repairs must be completed no later than 30 days after the 
date the settlement agreement is signed by the applicable parties.
    (c) Denial of dispute. During mediation, denial of a dispute by all 
parties without acceptance of responsibility will result in the 
mediator referring the matter to arbitration for determination of the 
defect and responsibility for the defect.
    (d) Written settlement agreement.
    (1) Upon reaching an agreement, the parties will sign a written 
settlement agreement. The dispute resolution provider will forward 
copies of the agreements with the original signatures of the parties to 
the parties, the homeowner, and to HUD.
    (2) Sample agreements will be made available to the parties as 
drafting guidance by the dispute resolution provider.
    (e) Failure of mediation. If mediation is not successful, parties 
or the homeowner may proceed to nonbinding arbitration, as provided in 
Sec.  3288.40 of this part.
    (f) Confidentiality. Except for the report of an alleged defect, 
any request for dispute resolution, and any written settlement 
agreement, all other documents and communications provided in 
confidence and used in the mediation will be confidential, in 
accordance with the Administrative Dispute Resolution Act of 1996 (5 
U.S.C. 571 et seq.).


Sec.  3288.40  Nonbinding arbitration.

    (a) When initiated. (1) If, following mediation under Sec.  
3288.35, the parties fail to reach a settlement, any party or the 
homeowner may, within 15 days of the expiration of the deadline 
applicable under Sec.  3288.35(b), initiate nonbinding arbitration.

[[Page 27232]]

    (2) In addition, arbitration may be initiated upon referral by the 
mediator pursuant to Sec.  3288.35(c).
    (b) Written request--(1) Submission to HUD. A written request for 
arbitration must be submitted to the dispute resolution provider. 
Information about the dispute resolution provider and how to make a 
request for dispute resolution will be available at http://www.hud.gov 
or by contacting HUD's Office of Manufactured Housing Programs at (202) 
708-6423 or (800) 927-2891.
    (2) Contents of request. The written request for arbitration must 
include:
    (i) The name and address of the party making the request;
    (ii) A brief description of the alleged defect or a copy of the 
report of the alleged defect; and
    (iii) A copy of the request for dispute resolution.
    (c) Appointment and authority of arbitrator. Upon receipt of the 
request, the dispute resolution provider will select an arbitrator. The 
arbitrator will have the authority to:
    (1) Set hearing dates and deadlines;
    (2) Conduct on-site inspections;
    (3) Issue requests for documentation and information necessary to 
complete the record;
    (4) Dismiss frivolous allegations;
    (5) Make proposed findings, including findings of defect and 
culpability and a disposition recommendation to HUD; and
    (6) Recommend apportionment of the responsibility of paying for or 
providing any correction or repair of the home when recommending that 
culpability be assessed to more than one party.
    (d) Denial of dispute. If the parties deny a dispute exists and the 
arbitrator determines there is a defect, the arbitrator will make a 
determination of responsibility for the defect.
    (e) Notice to parties. The dispute resolution provider will provide 
the parties and the homeowner with a notice setting forth the date, 
place, and time an arbitration is to be held.
    (f) Proceedings. (1) If all parties do not request an in-person 
hearing under paragraph (f)(2) of this section within 5 days of the 
dispute resolution provider's receipt of the request for arbitration, 
or if the arbitrator rejects the request for an in-person hearing, the 
arbitrator may conduct either a record review or a telephonic hearing.
    (2) If any party wants to request an in-person hearing, in which 
the parties or their representatives may personally appear before the 
arbitrator, the arbitrator will consider such a request if it is made 
by all of the parties that are participating in the arbitration. Such 
an in-person hearing will be held at the discretion of the arbitrator, 
after considering appropriate factors, such as cost.
    (g) Effect on nonparticipating parties. If a party chooses not to 
participate in the arbitration, the process will continue without 
further input from that party. In such a case, the arbitrator may rely 
on the record developed through the arbitration to find a 
nonparticipating party responsible for correction or repair of a 
defect.
    (h) Completion of arbitration. (1) Unless an extension is granted 
for good cause by HUD, the arbitrator, within 21 days of the dispute 
resolution provider's receipt of the request for arbitration, the 
arbitrator will complete the arbitration process and provide HUD with 
all background information used during the arbitration and with a 
written, nonbinding recommendation as to which party or parties are 
responsible for the defect, and what corrective actions should be 
taken.
    (2) Unless an extension is granted for good cause by HUD, the 
arbitrator, within 21 days of the dispute resolution provider's receipt 
of the request for arbitration, will provide the parties with a copy of 
the nonbinding recommendation that was delivered to HUD, in accordance 
with Sec.  3288.40(h)(1).
    (i) Settlement offers. At any time before HUD issues a final order, 
the parties may submit to HUD a proposal to resolve the dispute.


Sec.  3288.45  HUD review and order.

    (a) Appropriate order. HUD will review the arbitrator's 
recommendation provided in accordance with Sec.  3288.40(h), any 
settlement offers presented by the parties in accordance with Sec.  
3288.40(i), and the information gathered during the arbitration, and 
will issue an appropriate order in which HUD may accept, modify, or 
reject the recommendations. HUD will forward a copy of the order to the 
arbitrator and to each of the parties and the homeowner, whether or not 
a party chose to participate in the arbitration.
    (b) Contents of order. If HUD finds that a defect exists, the order 
will include the following:
    (1) Assignment of responsibility for the correction and repair of 
all defects and associated costs; and
    (2) If the manufacturer, retailer, or installer is responsible for 
corrective action, a date by which the correction and repair of each 
defect must be completed, taking into consideration the seriousness of 
the defect.
    (c) Failure to comply. Failure to comply with an order issued by 
HUD is a violation of section 610(a)(5) of the Act (42 U.S.C. 
5409(a)(5)).

Subpart C--Alternative Process in HUD-Administered States


Sec.  3288.100  Scope and applicability.

    The requirements of this subpart C may be followed in lieu of the 
requirements of subpart B of this part to resolve disputes among 
manufacturers, retailers, and installers of manufactured homes in any 
state where subpart B of this part would otherwise apply. In limited 
circumstances, this subpart C permits manufacturers, retailers, and 
installers of manufactured homes to use neutrals of their choosing to 
resolve disputes concerning alleged defects in manufactured homes.


Sec.  3288.105  Time when Alternative Process is available.

    (a) The Alternative Process may be invoked after an alleged defect 
has been reported, pursuant to Sec.  3288.15(b). However, the 
Alternative Process may not be invoked more than 7 days after 
notification of a request for dispute resolution has been received by 
all of the parties. The notification must be delivered by overnight 
delivery, commercial carrier, or fax by the screening neutral, in 
accordance with Sec.  3288.30. If within 7 days of the receipt of 
notification, the Alternative Process is not initiated, the screening 
neutral will refer the matter to the mediator. Once the Alternative 
Process is invoked, neither the parties nor the homeowner may invoke 
the Mediation and Arbitration Process in the HUD Manufactured Home 
Dispute Resolution Program for 30 days.
    (b) No particular form or format is required to provide 
notification for the Alternative Process, but the party or parties 
submitting the notification must include a statement from the parties 
participating in the Alternative Process stating that the homeowner is 
not responsible for the alleged defect and that one or more of the 
parties will correct or repair the defect. All required agreements are 
set forth in Sec.  3288.110 of this part. The parties must also make 
reasonable efforts to include the following information in the 
notification:
    (1) Identification of the case; and
    (2) Identification of the parties participating in the Alternative 
Process.
    (c) The screening neutral will notify the parties if the case is 
referred to the Alternative Process for resolution.


Sec.  3288.110  Alternative Process agreements.

    (a) Required agreement. To use the Alternative Process, the 
manufacturer,

[[Page 27233]]

retailer, and installer of the manufactured home at issue, as 
appropriate, must agree:
    (1) That there is a defect in the manufactured home;
    (2) That the manufacturer, retailer, or installer is responsible 
for the defect;
    (3) That the homeowner is not responsible for the defect;
    (4) To engage a neutral to evaluate the dispute and make an 
assignment of responsibility for correction and repair; and
    (5) To notify the homeowner of, and allow the homeowner to be 
present at, any meetings and to inform the homeowner of the outcome.
    (b) Additional element of agreement. In addition, the parties 
should agree to act upon the neutral's assignment of responsibility for 
correction and repair.

Subpart D--State Dispute Resolution Programs in Non-HUD 
Administered States


Sec.  3288.200  Applicability.

    This subpart D establishes the minimum requirements that must be 
met by a state to implement its own dispute resolution program and 
therefore not be covered by the HUD Manufactured Home Dispute 
Resolution Program established in accordance with subpart B. The 
subpart also establishes the procedure for determining whether the 
state dispute resolution program meets the requirements of the Act for 
operating in lieu of the HUD Manufactured Home Dispute Resolution 
Program.


Sec.  3288.205  Minimum requirements.

    (a) List of requirements. The HUD Manufactured Home Dispute 
Resolution Program will not be implemented in any state that complies 
with the procedures of this subpart D and that has a dispute resolution 
program that provides for the following minimum requirements:
    (1) The timely resolution of disputes among manufacturers, 
retailers, or installers regarding responsibility for correction and 
repair of defects in manufactured homes;
    (2) The issuance of appropriate orders for correction and repair of 
defects in such homes;
    (3) A coverage period for disputes that includes at least defects 
that are reported within 1 year after the date of first installation; 
and
    (4) Adequate funding and personnel.
    (b) Applicability to programs in state plans. (1) In order to 
include a dispute resolution program in a state plan that on February 
8, 2008 is fully or conditionally approved under Sec.  3282.302 of this 
chapter, a state must amend its state plan to provide for the 
requirements of paragraphs (a)(1) through (3) of this section.
    (2) After February 8, 2008, a state that submits a state plan for 
approval in accordance with Sec.  3282.302 of this chapter must provide 
for the requirements of paragraphs (a)(1) through (3) of this section 
in its state plan.


Sec.  3288.210  Acceptance and recertification process.

    (a) Submission of certification. A state seeking HUD acceptance of 
its state dispute resolution program under this subpart must submit to 
HUD a completed Dispute Resolution Certification Form, which is 
available by contacting HUD by telephone at (202) 708-6423 or by e-mail 
at [email protected]. The certification may be submitted as a part of, or 
independent of, a state plan under Sec.  3282.302 of this chapter. If 
included as part of a state plan, the state does not have to separately 
certify that it meets the requirements of Sec.  3288.205(a)(4).
    (b) HUD review and action. (1) HUD will review the Dispute 
Resolution Certification Form submitted by a state and may contact the 
state to request additional clarification or information as necessary. 
Upon completing its review, HUD will provide the state with notice of 
acceptance, conditional acceptance, or rejection of its dispute 
resolution program.
    (2) A notice of acceptance will include the date of acceptance.
    (3) If HUD rejects a state's dispute resolution program, HUD will 
provide an explanation of what is necessary to obtain full acceptance. 
A revised Dispute Resolution Certification Form may be submitted within 
30 days of receipt of such notification. If the revised Dispute 
Resolution Certification Form is inadequate or if the state fails to 
resubmit within the 30-day period or otherwise indicates that it does 
not intend to change its Dispute Resolution Certification Form, HUD 
will notify the state that its dispute resolution program is not 
accepted and that it has a right to a hearing on the rejection using 
the procedures set forth under subpart D of part 3282 of this chapter.
    (c) Conditional acceptance. A state meeting three of the four 
minimum requirements set forth under Sec.  3288.205(a)(1) through (4) 
will be conditionally accepted by HUD. If HUD conditionally accepts a 
state's dispute resolution program, HUD will provide an explanation of 
what is necessary to obtain full acceptance. A revised Dispute 
Resolution Certification Form may be submitted within 30 days of 
receipt of such notification. Any state conditionally accepted will be 
permitted to implement its own dispute resolution program for a period 
of not more than 3 years, absent extension of this period by HUD.
    (d) Revocation. If HUD becomes aware at any time that a state no 
longer meets the minimum requirements set forth under Sec.  3288.205, 
HUD may revoke acceptance of the state's certification after an 
opportunity for a hearing, using the procedures set forth under subpart 
D of part 3282.
    (e) Recertification of a program not included in state plan. Except 
as provided in paragraph (f), to maintain its accepted status, a state 
whose program is not included in an approved or conditionally approved 
state plan must submit a current Dispute Resolution Certification Form 
to HUD for review and acceptance as follows:
    (1) Every 3 years within 90 days of the day and month of the most 
recent date of HUD's acceptance of the state's program or
    (2) Whenever there is a significant change to the program.
    (f) Inclusion in state plan. If a state dispute resolution program 
is part of a state plan, it will be reviewed annually as part of the 
state plan and separate recertification of the state's dispute 
resolution program is not required.


Sec.  3288.215  Effect on other manufactured home program requirements.

    A state with an accepted dispute resolution program will operate in 
lieu of HUD's Manufactured Home Dispute Resolution Program established 
under subpart B of this part 3288. A state dispute resolution program, 
even if it is an accepted dispute resolution program under this part, 
does not supersede the requirements applicable to any other aspect of 
HUD's manufactured home program. Any responsibilities, rights, and 
remedies applicable under the Manufactured Home Construction and Safety 
Standards in part 3280 of this chapter and the Manufactured Home 
Procedural and Enforcement Regulations in part 3282 of this chapter 
continue to apply as provided in those parts in all states.

Subpart E--Dispute Resolution Program Rulemaking Procedures


Sec.  3288.300  Applicability.

    This subpart establishes special regulatory procedures for issuing 
or revising dispute resolution program regulations as codified in this 
part.

[[Page 27234]]

Sec.  3288.305  Consultation with the Manufactured Housing Consensus 
Committee.

    HUD will seek input from the MHCC when revising the HUD 
Manufactured Home Dispute Resolution Program regulations in this part 
3288. Before publication of a proposed rule to revise these 
regulations, HUD will provide the MHCC with an opportunity to comment 
on such revision. The MHCC may send to HUD any of the MHCC's own 
recommendations to adopt new dispute resolution program regulations or 
to modify or repeal any of the regulations in this part. Along with 
each recommendation, the MHCC must set forth pertinent data and 
arguments in support of the action sought. HUD will either: accept or 
modify the recommendation and publish it for public comment in 
accordance with section 553 of the Administrative Procedure Act (5 
U.S.C. 553), along with an explanation of the reasons for any such 
modification; or reject the recommendation entirely, and provide to the 
MHCC a written explanation of the reasons for the rejection. This 
section does not supersede section 605 of the National Manufactured 
Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5404).

    Dated: May 7, 2007.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.
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