[Federal Register Volume 76, Number 31 (Tuesday, February 15, 2011)]
[Proposed Rules]
[Pages 8852-8870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2907]



[[Page 8851]]

Vol. 76

Tuesday,

No. 31

February 15, 2011

Part II





Department of Housing and Urban Development





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24 CFR Part 3282



Manufactured Housing: Notification, Correction, and Procedural 
Regulations; Proposed Rule

  Federal Register / Vol. 76 , No. 31 / Tuesday, February 15, 2011 / 
Proposed Rules  

[[Page 8852]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 3282

[Docket No. FR-5238-P-01]
RIN 2502-AI84


Manufactured Housing: Notification, Correction, and Procedural 
Regulations

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

ACTION: Proposed rule.

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SUMMARY: HUD is proposing to revise its regulations that implement 
statutory requirements concerning how manufacturers and others address 
reports of problems with manufactured homes. These ``Subpart I'' 
regulations establish a system of protections with respect to imminent 
safety hazards and violations of the Federal construction and safety 
standards, assuring a minimum of formality and delay, while protecting 
the rights of all parties. The regulations implement requirements 
established by Congress in the National Manufactured Housing 
Construction and Safety Standards Act of 1974. Manufacturers, 
retailers, and distributors, State Administrative Agencies, primary 
inspection agencies, and the Secretary would follow the procedures set 
out in Subpart I to assure that notification and correction are 
provided with respect to manufactured homes, when required. These 
remedial actions are not required, however, for failures that occur in 
any manufactured home or component as the result of normal wear and 
aging, unforeseeable consumer abuse, or unreasonable neglect of 
maintenance.

DATES: Comment Due Date: April 18, 2011.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 451 
7th Street, SW., Room 10276, Department of Housing and Urban 
Development, Washington, DC 20410-0500. All submissions must refer to 
the above docket number and title. There are two methods for submitting 
public comments.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    Facsimile (FAX) comments are not acceptable. In all cases, 
communications must refer to the above docket number and title. All 
comments and communications submitted will be available, without 
charge, for public inspection and copying between 8 a.m. and 5 p.m. 
weekdays at the above address. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
public comments by calling the Regulations Division at 202-708-3055 
(this is not a toll-free number). Copies of the public comments are 
also available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Office of Manufactured Housing 
Programs, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 9164, Washington, DC 20410; telephone number 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 800-877-8339.

SUPPLEMENTARY INFORMATION: This proposed revision of Subpart I is based 
on a previous revision developed and submitted by the Manufactured 
Housing Consensus Committee (MHCC) for the Secretary's consideration. 
HUD agreed with most, but not all, of that revision. These changes are 
discussed in the ``Supplementary Information'' section of this 
document. For the convenience of commenters on today's proposed rule, 
HUD will provide page numbers to the location of the MHCC's 
recommendation within the Federal Register, to facilitate comparison.

I. Background

    Since 1976, a major component of HUD's manufactured housing 
regulations has been the procedural and enforcement provisions in 24 
CFR part 3282, subpart I (``Subpart I''). These provisions establish 
the system for manufacturers and retailers to assure that factory-built 
homes sold to consumers after having been manufactured pursuant to a 
federal building code provide at least the protections that are built 
into the construction and safety standards in that building code. 
Because the federal building code preempts a multiplicity of state and 
local building codes that would otherwise apply to the construction of 
such homes, manufacturers, distributors, retailers, and regulators are 
charged with particular responsibilities designed to protect both the 
purchasers of these homes and the general public. The regulations in 
Subpart I seek to balance the interests of all persons who have a stake 
in the future of quality, affordable manufactured housing.
    As the manufactured housing industry has evolved from largely 
single-section homes to today's multiple-section homes that can be 
creatively and aesthetically configured and finished while maintaining 
the important affordable character of the homes, various parties have 
identified a need to refine the regulations in Subpart I. The 
Manufactured Housing Consensus Committee (MHCC) has made refinement of 
these regulations a priority, and HUD has worked with the MHCC to 
redraft Subpart I in a way that would address issues identified by 
regulated entities, State and Federal regulators, and consumers.
    The MHCC was established by amendments made in December 2000 to the 
National Manufactured Housing Construction and Safety Standards Act of 
1974, 42 U.S.C. 5401-5426 (the Act), in large part 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. (See 42 
U.S.C. 5403(a)(3)(A).) The 22-member Federal Advisory Committee 
includes seven voting members in each of three categories, plus a 
nonvoting representative of the Secretary. The three categories, as 
established in the Act, are: (1) Producers; (2) Users; and (3) General 
Interest and Public Officials.
    The MHCC has twice recommended specific revisions of Subpart I to 
the Secretary. To be promulgated under the Secretary's authority, 
however, the recommended revisions must be consistent with the Act. In 
both cases, HUD concluded that the MHCC recommendations were not 
consistent with the statutory requirements and the

[[Page 8853]]

Secretary's authority. (See 68 FR 47881 (August 12, 2003, amending 68 
FR 35850, July 25, 2003) and 71 FR 34464 (June 14, 2006) (``June 14 
notice'').)
    The June 14, 2006, notice included the complete text of the most 
recent MHCC recommendation. This second set of recommendations by the 
MHCC was developed through much more extensive discussions in public 
meetings of the MHCC and in task force and subcommittees than was the 
first set, and was very close to being acceptable under the Act. HUD 
has based today's proposed rule on the second set of the MHCC 
recommendations, with a few modifications. As required by section 
604(b)(3) of the Act (42 U.S.C. 5403(b)(3)), HUD first submitted its 
proposed rule to the MHCC for the committee's prepublication review and 
comments. HUD has considered those comments and now is issuing this 
proposed rule for public comment. Most of the text of this proposal is 
the same as the text that was included in the MHCC proposal submitted 
to HUD, as published in the June 14, 2006 notice. HUD believes that 
today's proposed rule provides clearer regulatory structure and 
appropriate consumer protection provisions, while substantially 
adopting the MHCC recommendation.

II. Reasons for HUD's Changes

    Between the time that the MHCC submitted its recommended revision 
of Subpart I and the time that HUD developed today's proposed rule 
based on the MHCC recommendation, numerous meetings of the MHCC and HUD 
were held to discuss the MHCC recommendation and HUD-suggested 
revisions. Agreement was reached in principle on some further changes 
suggested by HUD or members of the MHCC. Agreement could not be reached 
on all of the changes, however, so there was no reason for the MHCC to 
amend its recommendation to include the changes agreed upon. Instead, 
HUD has included those changes in today's proposed rule.
    While HUD agreed with the MHCC on the majority of the language used 
in today's proposed rule, some of the MHCC's language was not 
consistent with the Act. HUD's proposed rule also differs from the MHCC 
language by adding consumer protections when warranted, ensuring that 
provisions are internally consistent, and adding flexibility that 
benefit both manufacturers and regulators. A few editorial changes have 
also been made for the purpose of clarifying the intent of the 
applicable provision.
    Most of the changes made by HUD to the MHCC recommendation can be 
explained using six justifications, many of which are also contained in 
the June 14, 2006, notice rejecting the MHCC language. The 
justifications are as follows:
    Justification 1: Changes agreed on in principle by HUD and MHCC in 
prepublication meetings. This justification applies to the change made 
in Sec.  3282.362(c)(1).
    Justification 2: The rejected MHCC language was not consistent with 
statutory authority. 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 with respect to homes delivered to retailers and 
distributors before those homes are sold to purchasers. HUD's proposed 
rule recognizes those statutory responsibilities, which the MHCC 
recommendation failed to acknowledge appropriately. Consistent with the 
Act, however, HUD continues 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's proposed rule does not adopt MHCC language that would have 
established new responsibilities for retailers and distributors that 
are not found in the Act, would have limited the manufacturers' pre-
sale correction responsibilities, and could have required 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 did not adopt MHCC language in Sec.  3282.415(d) 
that would have been inconsistent with sections 613 and 623(b)(12) of 
the Act (42 U.S.C. 5412 and 5422(b)(12)). The dispute resolution 
program referenced in the MHCC language is intended to address problems 
reported in manufactured homes after installation, while the regulatory 
section included language to address corrections that would be required 
before a home is sold.
    This justification applies to the changes made in Sec. Sec.  
3282.404(b)(3), 3282.405(a)(2), 3282.415(c), and 3282.415(d). At the 
same time, however, in Sec.  3282.405(a)(2) the phrase ``introduced 
systematically'' was inserted, by agreement in principle with the MHCC. 
As a result of the change in Sec.  3282.415(d), the subsequent 
paragraphs had to be redesignated.
    Justification 3: Other proposed modifications: determination 
factors. HUD is also proposing a few other modifications to the MHCC's 
language, even though HUD did not base its June 14, 2006, notice of 
rejection of the MHCC language 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 language 
would have revised the current provision by permitting inspection of 
the records, including consumer and retailer complaints, rather than 
the homes.
    HUD proposes modifying that permissive language to make it clear 
that the methodology would be acceptable only 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 that 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. HUD would also clarify that, in selecting a 
methodology, the manufacturer is expected to rely on information it 
discovers during an investigation, not just information initially 
provided in a complaint.
    This justification applies to the changes made in Sec.  
3282.404(c).
    Justification 4: Other suggested modifications: recordkeeping. HUD 
also proposes adding language in the recordkeeping requirements that, 
rather than mandating how manufacturers maintain records regarding 
corrective actions, would provide manufacturers options for how to 
comply with the requirements. HUD's proposal would also avoid using an 
undefined term that may have several uses in the industry and create 
confusion. These modifications would provide manufacturers flexibility 
regarding 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

[[Page 8854]]

preferred by some manufacturers and would reduce the amount of 
paperwork required. HUD would add such an option 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. This justification applies 
to the changes made in Sec.  3282.417.
    Justification 5: 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 recommendations for these sections 
would be retained, however. Section 3282.411 of the MHCC recommendation 
would have established the prerequisites for any state administrative 
agency (SAA) to refer information to the appropriate SAA or HUD for 
possible investigation. Section 3282.412 would have set forth 
requirements for HUD or an appropriate SAA to initiate a formal 
administrative investigation process. The revisions HUD proposes to 
make in these sections are 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 Production Inspection Primary 
Inspection Agency (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.
    This justification applies to the changes made in Sec. Sec.  
3282.404(a), 3282.411, and 3282.412.
    Justification 6: Finally, HUD included clarifying and 
nonsubstantive, editorial changes in the modified version of the MHCC 
recommendations 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. Punctuation 
changes are also included in this justification. This justification 
applies to the changes made in Sec. Sec.  3282.7(j), (v), and (dd); 
3282.401(b); 3282.406(b)(3); 3282.407(b); 3282.409(c)(5) and 
(c)(7)(ii); 3282.413(a), (b), (c), (d), and (f); 3282.415(b); 
3282.416(b)(2); and 3282.417.
    To make it easier for readers to cross-reference to these 
justifications from the changes indicated in the proposed rule, the 
following table also lists the sections of the MHCC recommendation that 
have been modified by HUD, and also provides their page number location 
in the June 14 notice:

----------------------------------------------------------------------------------------------------------------
                                                                                         HUD's justification for
          Section(s)              Reference to MHCC rule (in        MHCC's original          modifying MHCC's
                                     June 14, 2006 Notice)          recommendations           recommendation
----------------------------------------------------------------------------------------------------------------
3282.7(j) and (v) and (dd)....  71 FR 34466...................  No MHCC recommendation.  Justification 6--HUD's
                                                                 Editorial change.        clarifying and
                                                                                          nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.362(c)(1)................  71 FR 34466...................  MHCC included use of an  Justification 1--This
                                                                 undefined term           justification applies
                                                                 ``Service record''.      to the change made in
                                                                                          Sec.   3282.362(c)(1).
                                                                                          The MHCC
                                                                                          recommendation uses
                                                                                          the term ``service
                                                                                          record,'' with no
                                                                                          guidance on the
                                                                                          contents of a
                                                                                          ``service record,''
                                                                                          which could have led
                                                                                          to more confusion
                                                                                          about the requirements
                                                                                          and duplicative filing
                                                                                          systems.
3282.401(b)...................  71 FR 34466...................  MHCC omitted             Justification 6--HUD
                                                                 ``distributors'' from    added ``distributors''
                                                                 the list of regulated    to mean any person
                                                                 parties.                 engaged in the sale
                                                                                          and distribution of
                                                                                          manufactured homes for
                                                                                          resale. Clarifying and
                                                                                          nonsubstantive,
                                                                                          editorial changes that
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.404(a)...................  71 FR 34467...................  MHCC recommended         Justification 5--HUD
                                                                 expanding from 20 days   accepted MHCC's
                                                                 (current 3282.404(b))    recommendation to
                                                                 to 30 days for           expand from 20 to 30
                                                                 manufacturer to make     days.
                                                                 initial determinations.
3282.404(b)(3)................  See 71 FR 34467...............  MHCC recommended         Justification 2--HUD's
                                                                 language to limit a      proposed rule does not
                                                                 manufacturer's           adopt MHCC proposed
                                                                 notification             language that would
                                                                 responsibilities to      have established new
                                                                 only problems caused     responsibilities for
                                                                 by persons working on    retailers and
                                                                 behalf of a              distributors not found
                                                                 manufacturer, such as    in the Act. The
                                                                 a retailer.              proposed language
                                                                                          would have limited the
                                                                                          manufacturers' pre-
                                                                                          sale correction
                                                                                          responsibilities, and
                                                                                          could have required
                                                                                          HUD and state
                                                                                          regulators to meet new
                                                                                          burdens of proof in
                                                                                          assuring production of
                                                                                          manufactured homes
                                                                                          that meet HUD's
                                                                                          standards.

[[Page 8855]]

 
3282.404(c)(1) and (c)(2)(iii)  71 FR 34467...................  MHCC language would      Justification 3--HUD
                                                                 have limited             rejected this language
                                                                 manufacturer's search    and instead requires
                                                                 for defects to           manufacturers to use
                                                                 consumer complaints      appropriate methods
                                                                 and retailer records.    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. HUD's
                                                                                          language does allow
                                                                                          the manufacturer to
                                                                                          solely use those
                                                                                          records, but only when
                                                                                          consumers and
                                                                                          retailers understand
                                                                                          and report the defect
                                                                                          or problem. But HUD
                                                                                          has retained the
                                                                                          required use of other
                                                                                          sources of
                                                                                          information.
3282.405(a)(2)................  71 FR 34468...................  MHCC language would      Justification 2--HUD
                                                                 have established new     removed this because
                                                                 responsibilities for     the proposed language
                                                                 parties not designated   is inconsistent with
                                                                 in the Act and limited   statute. HUD did,
                                                                 manufacturers' pre-      however, maintain in
                                                                 sale correction          405(a), the phrase
                                                                 responsibilities, and    developed in
                                                                 could have required      conjunction with the
                                                                 HUD and state            MHCC: ``introduced
                                                                 regulators to meet new   systematically.''
                                                                 burdens of proof in
                                                                 assuring production of
                                                                 manufactured homes
                                                                 that comply with the
                                                                 federal construction
                                                                 and safety standards.
3282.406(b)(3)................  71 FR 34468...................  Editorial change. No     Justification 6--HUD's
                                                                 modification to the      clarifying and
                                                                 MHCC recommendation.     nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.407(b)...................  71 FR 34468...................  Editorial change. No     Justification 6--HUD's
                                                                 modification to the      clarifying and
                                                                 MHCC recommendation.     nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.409(c)(5)................  71 FR 34469...................  Editorial change. No     Justification 6--HUD's
                                                                 modification to the      clarifying and
                                                                 MHCC recommendation.     nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.409(c)(7)(ii)............  71 FR 34469...................  Editorial change. No     Justification 6--HUD's
                                                                 modification to the      clarifying and
                                                                 MHCC recommendation.     nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.411 and 3282.412.........  71 FR 34470...................  The general structure    Justification 5--The
                                                                 of the MHCC              general structure of
                                                                 recommendations for      the MHCC
                                                                 these sections would     recommendations for
                                                                 be retained.             these sections would
                                                                                          be retained; however,
                                                                                          HUD would reorganize
                                                                                          Sec.  Sec.   3282.411
                                                                                          and 3282.412 of the
                                                                                          MHCC recommendation,
                                                                                          to assure these
                                                                                          provisions are
                                                                                          internally consistent.
                                                                                          The revisions HUD
                                                                                          proposes to make in
                                                                                          these sections are
                                                                                          technical changes to
                                                                                          simplify and clarify
                                                                                          the provisions and to
                                                                                          avoid overlap within
                                                                                          the two sections.
3282.413(a), (b), (c), (d),     71 FR 34470-34471.............  Editorial change. No     Justification 6--HUD's
 and (f).                                                        modification to the      clarifying and
                                                                 MHCC recommendation.     nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.415(b)...................  71 FR 34472...................  Editorial change. No     Justification 6--HUD's
                                                                 modification to the      clarifying and
                                                                 MHCC recommendation.     nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.415(c)...................  71 FR 34472...................  MHCC recommended         Justification 2--HUD
                                                                 eliminating phrases to   removed this because
                                                                 limit the                the proposed language
                                                                 manufacturers' pre-      is inconsistent with
                                                                 sale correction          the statute.
                                                                 responsibilities.

[[Page 8856]]

 
3282.415(d)...................  71 FR 34472...................  MHCC recommended that    Justification 2--HUD
                                                                 retailers/distributors   removed 415(d) because
                                                                 become responsible       the proposed language
                                                                 parties in the           is inconsistent with
                                                                 notification and         Sections 613 and
                                                                 correction process.      623(c)(12) of the Act
                                                                                          (42 U.S.C. 5412 and
                                                                                          5422 (c)(12)).
3282.416(b)(2)................  71 FR 34472...................  Editorial change. No     Justification 6--HUD's
                                                                 modification to the      clarifying and
                                                                 MHCC recommendation.     nonsubstantive,
                                                                                          editorial changes
                                                                                          would be minor and for
                                                                                          the purpose of making
                                                                                          the intent of the
                                                                                          applicable provision
                                                                                          clearer. Punctuation
                                                                                          changes were also
                                                                                          included in this
                                                                                          justification.
3282.417......................  71 FR 34472...................  MHCC recommended         Justification 4--HUD's
                                                                 rejecting all of Sec.    modifications would
                                                                  3282.417.               provide manufacturers
                                                                                          flexibility regarding
                                                                                          how they keep records,
                                                                                          including what are
                                                                                          referred to as
                                                                                          ``service records.''
                                                                                          HUD's proposal also
                                                                                          outlines how current
                                                                                          service records may be
                                                                                          supplemented with all
                                                                                          required determination
                                                                                          records, but without
                                                                                          creating and
                                                                                          maintaining a separate
                                                                                          set of files. HUD's
                                                                                          proposal recognizes a
                                                                                          manufacturer's right
                                                                                          to keep these records
                                                                                          in a central class
                                                                                          determination file,
                                                                                          reducing the amount of
                                                                                          paperwork required.
                                                                                          The recommendation
                                                                                          allows this, but does
                                                                                          not require this.
                                                                                         Justification 6--
                                                                                          Clarifying and non-
                                                                                          substantive, editorial
                                                                                          changes that would be
                                                                                          minor and for the
                                                                                          purpose of making the
                                                                                          intent of the
                                                                                          applicable provision
                                                                                          more clear.
                                                                                          Punctuation changes
                                                                                          were also included in
                                                                                          this justification.
----------------------------------------------------------------------------------------------------------------

III. Response to MHCC Comments

    As noted, before publishing this proposed rule, HUD was required by 
section 604(b)(3) of the Act (42 U.S.C. 5403(b)(3)) to first submit its 
proposal to the MHCC for its prepublication review and comments. HUD 
has considered those comments and now is issuing this proposed rule for 
public comment. In MHCC committee and subcommittee meetings, HUD had 
repeatedly discussed with MHCC members its concerns with the most 
recent MHCC recommendation for revision of Subpart I. As a consequence 
of these discussions and HUD's explanations in the June 14, 2006, 
notice, the MHCC was fully informed of the substantive changes HUD is 
proposing in today's publication, even before the proposal was formally 
submitted to the MHCC for its review.
    Nevertheless, if HUD rejects any significant comments provided by 
the MHCC during its formal review of the HUD proposed rule, the Act 
further requires HUD to: (1) Provide to the MHCC a written explanation 
of the reasons for the rejection; and (2) publish the MHCC's comments 
and HUD's response in the Federal Register for public comment.
    In order to comply fully with the requirements of the Act, and so 
that there is no question about whether HUD has appropriately 
characterized any particular comment of the MHCC as ``significant,'' 
HUD recommends a side-by-side comparison with the June 14 notice. HUD 
is referencing the page numbers to where the MHCC's original proposed 
text can be found. The MHCC incorporated into its comments by reference 
its own previous recommendations and the principles it had adopted to 
guide its own efforts to revise the regulations in Subpart I. Both of 
those documents have been published in the June 14 notice. The June 14 
notice is available through the Government Printing Office's Federal 
Register Web site at http://www.gpoaccess.gov/fr/index.html (search 
using the citation ``71 FR 34464, June 14, 2006'').
    This preamble and the changes indicated in the proposed rule 
provide HUD's primary response to the MHCC prepublication comments. 
Additional HUD responses to the MHCC prepublication comments are as 
follows:
    The MHCC comments continue to confuse the statutory authorities and 
procedures that are applicable to the distinct responsibilities of the 
regulators and regulated parties for the new dispute resolution program 
and the installation programs, as distinguished from the historical 
construction and safety standards program. HUD continues to believe 
that its total regulatory framework will be consistent with the Act and 
that Congress has made HUD responsible for implementing the statute.
    Some of the MHCC prepublication comments do not accurately reflect 
either its own recommendations or HUD's proposed rule. For example, the 
comments on the recordkeeping provisions suggest that the MHCC 
requirements would be less burdensome than the HUD requirements. HUD's 
proposal evolved because the MHCC recommendation used an undefined term 
(``service records''), which might have several uses in the industry 
and create confusion about the recordkeeping requirements and lead to 
duplicative filing systems. HUD's less-prescriptive proposal, seen in 
the changes in Sec. Sec.  3282.417(b) and (c), affords manufacturers 
flexibility in deciding how to keep their records, so that they are not 
required to repeat the same information in the file associated with 
every manufactured home that is part of a class determination. HUD's 
proposal also permits, but does not require, that manufacturers 
maintain records in a single or central class determination file. 
Notwithstanding, HUD specifically welcomes comment on whether it should 
require a single or central class determination file, whether

[[Page 8857]]

it should define the term ``service records,'' and, if so, how it 
should define the term.
    Further, HUD's proposed rule provides additional, not less, 
authority to SAAs to initiate and pursue preliminary and final 
determinations about problems in manufactured homes. The proposed rule 
also distinguishes between the responsibility for manufacturers to 
investigate ``likely'' defects, while the State and Federal regulators 
would continue to have the authority conferred by the Act to 
investigate possible defects. The MHCC comments also fail to 
acknowledge that regulators would still have to meet a higher standard 
of evidence before they could enforce notification or correction 
procedures against a manufacturer for a defect.
    The MHCC also fails to distinguish between the statutory remedies 
of notification and correction. Under the Act, manufacturers are 
required to notify retailers and consumers about problems that render 
the manufactured home or any component unfit for its ordinary use, 
while the manufacturer is required to correct the problem only when it 
both presents a significant health or safety issue and is related to an 
error in design or assembly by the manufacturer. In its comments, the 
MHCC suggests that HUD can and should use its regulatory authority to 
rewrite these statutory requirements adopted by Congress.
    On the other hand, the MHCC fails to acknowledge that HUD would 
adopt MHCC-recommended language that, for the first time, expressly 
recognizes a manufacturer's right to seek indemnification from 
component producers (Sec.  3283.406(e)(2)) and other commercial 
entities (Sec.  3282.415(h)) for the costs of corrections. Such 
arrangements would not be contrary to the Act, although section 622 of 
the Act (42 U.S.C. 5421) provides that purchasers may not waive their 
rights under it. The proposed rule (Sec.  3282.402(b)) also continues 
to protect manufacturers from responsibility for normal aging of 
manufactured homes and consumer abuse, as do the current regulations.
    The MHCC comments suggest that HUD should not offer its own 
revisions to clarify language that, applying its experience as a 
regulator, HUD can identify as problematic. In the past, the 
regulations have allowed manufacturers to identify a class of 
manufactured homes that might share a certain defect, by inspecting 
homes. HUD has accepted for this proposed rule a MHCC recommendation 
that revises this optional method to permit inspection of records, but 
HUD has added that the method should be used only when the defect is 
such that there could be a reasonable expectation that the defect would 
be reported by a consumer or retailer. HUD continues to believe that a 
manufacturer should not rely on a records review when the defect 
involves a hidden construction problem, such as improper firestopping.
    Before any final rule becomes effective, HUD will, of course, also 
respond to public comment on today's proposed rule, including further 
comments from the MHCC and its members.

IV. Findings and Certifications

Regulatory Planning and Review

    This rule is not a significant regulatory action under section 3(f) 
of Executive Order 12866, Regulatory Planning and Review, and it was 
not reviewed by the Office of Management and Budget (OMB). This rule 
revises 24 CFR part 3282, subpart I, which provides the procedures by 
which HUD enforces the notification and correction of defects 
requirements of the Manufactured Home Construction and Safety Standards 
Act of 1974. This rule is not significant because it reorganizes and 
streamlines the existing regulation and proposes to clarify rather than 
change or add substance to the existing regulation.

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 proposed rule does 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

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant 
Impact is available for public inspection between the hours of 8 a.m. 
and 5 p.m. weekdays in the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500.

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.
    HUD is proposing to revise its current regulations in 24 CFR part 
3282, subpart I, in order to make them more clear and consistent with 
the Act. These revisions are, in large part, based on recommendations 
by the MHCC. The revisions, however, do not greatly change current 
requirements affecting or preempting state law. Participation by an SAA 
in HUD's Manufactured Housing Program is optional, and preemption of 
state law is provided only to the extent required by the Act.

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule have been approved by OMB under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2502-0541. 
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.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
HUD is required by law to implement statutory requirements concerning 
how manufacturers and others address reports of problems with 
manufactured homes, in order to protect both purchasers of factory-
built homes and the general public. Small entities would not be 
burdened by this rule because this rule would not establish 
requirements that differ significantly from current requirements. This 
rule would streamline the current regulatory

[[Page 8858]]

process to reduce burdens on small entities. Roughly 60,000 
manufactured homes are produced each year, and this rule would not 
affect or alter the cost of manufacture of such homes. For instance, 
this rule would revise current regulations to allow manufacturers to 
indemnify themselves through agreements or contracts with retailers, 
transporters, installers, distributors, or others for certain costs 
associated with corrective work performed. As a result, HUD does not 
believe that the rule would have a significant economic effect on a 
substantial number of small entities. Further, the rule is intended to 
have a beneficial impact, by reducing the recordkeeping burdens on 
manufacturers. For example, manufacturers would be allowed to keep 
records in a central file, thereby reducing recordkeeping requirements 
for small entities. Also under the rule, manufacturers would no longer 
be required to provide notification of a possible defect if only one 
home is involved and the manufacturer corrects the home, thus further 
reducing paperwork burdens on small entities. These revisions impose no 
significant economic impact on a substantial number of small entities. 
Therefore, the undersigned certifies that this rule will not have a 
significant impact on a substantial number of small entities.
    Notwithstanding HUD's view that this rule would not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Catalog of Federal Domestic Assistance

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

List of Subjects in 24 CFR Part 3282

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

    Accordingly, for the reasons stated in the preamble, HUD proposes 
to amend part 3282 of title 24 of the Code of Federal Regulations, as 
follows:

PART 3282--MANUFACTURED HOUSING PROCEDURAL AND ENFORCEMENT 
REGULATIONS

    1. The authority citation for part 3282 continues to read as 
follows:

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

    2. In Sec.  3282.7, revise paragraphs (j) and (v), and add 
paragraph (dd) to read as follows:


Sec.  3282.7  Definitions.

* * * * *
    (j) 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.
* * * * *
    (v) 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.
* * * * *
    (dd) 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.
* * * * *
    3. In Sec.  3282.362, paragraph (c)(1), add a sentence immediately 
before the last sentence to read as follows:


Sec.  3282.362  Production Inspection Primary Inspection Agencies 
(IPIAs).

* * * * *
    (c) * * *
    (1) * * * The IPIA must periodically review the records that Sec.  
3282.417(e) requires the manufacturers to keep, for determinations 
under Sec.  3282.404, to determine 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. * * *
* * * * *
    4. Revise subpart I to read as follows:
Subpart I--Consumer Complaint Handling and Remedial Actions
Sec.
3282.401 Purpose and scope.
3282.402 General provisions.
3282.403 Consumer complaint and information referral.
3282.404 Manufacturers' determinations and related concurrences.
3282.405 Notification pursuant to manufacturer's determination.
3282.406 Required manufacturer correction.
3282.407 Voluntary compliance with the notification and correction 
requirements under the Act.
3282.408 Plan of notification required.
3282.409 Contents of plan.
3282.410 Implementation of plan.
3282.411 SAA initiation of remedial action.
3282.412 Preliminary and final administrative determinations.
3282.413 Implementation of Final Determination.
3282.414 Replacement or repurchase of homes after sale to purchaser.
3282.415 Correction of homes before sale to purchaser.
3282.416 Oversight of notification and correction activities.
3282.417 Recordkeeping requirements.
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, and distributors, SAAs, 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 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.

[[Page 8859]]

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, defect, serious defect, or imminent 
safety hazard, or that the information requires no further action under 
this subpart. When no further action under this subpart 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) When a manufacturer makes an initial determination that there 
is a serious defect or an imminent safety hazard, the manufacturer must 
immediately notify the Secretary, the SAA in the state of manufacture, 
and the manufacturer's IPIA.
    (3) In making the determination of noncompliance, defect, serious 
defect, or imminent safety hazard, or that no further action is 
required under this subpart, 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 since 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. 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 or faulty construction, 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 or developed, 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

[[Page 8860]]

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, if it is clear that the cause of the 
defect, serious defect, or imminent safety hazard is such that the 
defect, serious defect, or imminent safety hazard would be readily 
reportable by consumers or retailers;
    (iv) Inspection of manufacturer quality control records to 
determine whether quality control procedures were followed and, if not, 
the time frame 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 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, in more than one home, the same defect introduced 
systematically, a serious defect, or an imminent safety hazard.
    (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 class 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 an initial 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 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 one-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 (b) must be brought into compliance with applicable 
construction and safety standards or, where those 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.

[[Page 8861]]

    (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 choses 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, defect, 
serious defect, or 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 
by 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 SAAs and the Secretary, if the manufacturer makes the 
correction as agreed to and any imminent safety hazard or serious 
defect is eliminated.
    (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 frame 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;
    (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

[[Page 8862]]

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 must read 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 
of any signs that the owner might see, hear, smell, or feel that 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 the 
problem 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 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 if the SAA or the Secretary decides that the 
extension is justified and 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  SAA initiation of remedial action.

    (a) SAA review of information. Whenever an SAA has information 
indicating the possible existence of a noncompliance, defect, serious 
defect, or imminent safety hazard in a manufactured home, the SAA may 
initiate administrative review of the need for notification and 
correction. An SAA initiates administrative review by either:
    (1) Referring the matter to another SAA in accordance with 
paragraph (b) of this section or to the Secretary; or

[[Page 8863]]

    (2) Taking action itself in accordance with Sec.  3282.412, when it 
appears that all of the homes affected by the noncompliance, defect, 
serious defect, or imminent safety hazard were manufactured in the 
SAA's State.
    (b) SAA referral of matter. If at any time it appears that the 
affected manufactured homes were manufactured in more than one State, 
an SAA that decides to initiate such administrative review must refer 
the matter to the Secretary for possible action pursuant to Sec.  
3282.412. If it appears that all of the affected manufactured homes 
were manufactured in another State, an SAA that decides to initiate 
administrative review must refer the matter to the SAA in the State of 
manufacture or to the Secretary, for possible action pursuant to Sec.  
3282.412.


Sec.  3282.412  Preliminary and final administrative determinations.

    (a) Grounds for issuance of preliminary determination. The 
Secretary or, in accordance with Sec.  3282.411, an SAA in the State of 
manufacture, 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;
    (2) The Secretary or SAA has information that indicates a 
noncompliance, defect, serious defect, or imminent safety hazard 
possibly exists, and, in the case of the SAA, the SAA believes that:
    (i) The affected manufactured home has been sold or otherwise 
released by a manufacturer to a retailer or distributor, but there is 
no completed sale of the home to a purchaser;
    (ii) Based on the same factors that are established for a 
manufacturer's class determination in Sec.  3282.404(b), the 
information indicates a class of homes in which a noncompliance or 
defect possibly exists; or
    (iii) The information indicates one or more homes in which a 
serious defect or an imminent safety hazard possibly exists;
    (3) The Secretary or SAA is reviewing a plan under Sec.  3282.408 
and the Secretary or SAA disagree with the manufacturer on proposed 
changes to the plan;
    (4) The Secretary or SAA believes that the manufacturer has failed 
to fulfill the requirements of a waiver granted under Sec.  3282.407; 
or
    (5) There is information that a manufacturer failed to make the 
determinations required under Sec.  3282.404.
    (b) Additional requirements--SAA issuance. (1) An SAA that receives 
information that indicates a serious defect or an imminent safety 
hazard possibly exists in a home manufactured in that SAA's State must 
notify the Secretary about that information.
    (2) 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) Additional requirements--Secretary issuance. The Secretary will 
notify the SAA of each State where the affected homes were 
manufactured, and, to the extent 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.
    (d) 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.
    (e) Presentation of views. (1) If a manufacturer elects to exercise 
its right to a hearing or presentation of views, 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.
    (f) Issuance of Final Determination. (1) The SAA or the Secretary, 
as appropriate, may make a Final Determination that is based on the 
allegations in the preliminary determination and adverse to the 
manufacturer 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 a 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

[[Page 8864]]

or 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)(2) 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 days after issuance of the order, 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 days after issuance of the order, 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, a serious defect, a 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 and shall submit it for consideration 
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 ask 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 
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 grants 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 one year and the amount of depreciation is based on:
    (i) Actual use of the home; and

[[Page 8865]]

    (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 exercise of due 
care contains a noncompliance, defect, serious defect, or 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 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 imminent 
safety hazard, 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 
pay all transportation charges involved, if any, and a reasonable 
reimbursement of not less than one 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 one 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) 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)).
    (e) 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.
    (f) 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.
    (g) 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 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, with the construction and safety 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, the 
manufacturer must provide a complete

[[Page 8866]]

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 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).
    (3) When the records that a manufacturer is required to keep in 
accordance with this paragraph (b) involve a class of manufactured 
homes that have the same noncompliance, defect, serious defect, or 
imminent safety hazard, the manufacturer has the option of meeting the 
requirements of this paragraph by establishing a class determination 
file, instead of including the same information in the file required by 
paragraph (e) of this section for each affected home. Such class 
determination file must contain the records of each class 
determination, notification, and correction, as applicable. For each 
class determination, the manufacturer must record once in each class 
determination file the information common to the class, and must 
identify by serial number all of the homes that the class comprises and 
that are subject to notification and correction, as applicable.
    (c) Manufacturer records of notifications. When a manufacturer is 
required to provide notification under this subpart, the manufacturer 
must maintain a record 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 a record of 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;
    (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) Maintenance of manufacturer's records. (1) Except as provided 
in paragraph (b)(3) of this section, for each manufactured home 
produced by a manufacturer, the manufacturer must maintain all of the 
information required by paragraphs (b), (c), and (d) of this section in 
a printed or electronic format, and must consolidate the information in 
a readily accessible file or in a readily accessible combination of a 
printed file and an electronic file. For each home, the manufacturer 
also must include in such file a copy of the home's data plate; all 
information related to manufacture, handling, and assembly of the home; 
any checklist or similar documentation used by the manufacturer in the 
transport of the home; the name and address of the retailer; the 
original or a copy of each purchasers' registration record received by 
the manufacturer; all correspondence with the retailer and homeowner 
that is related to the home; any information received by the 
manufacturer regarding set-up of the home; all work orders for 
servicing the home; and the information that the manufacturer is 
required to keep pursuant to Sec.  3282.211. The manufacturer must 
organize all such files in order of the serial number of the homes 
produced.
    (2) The manufacturer must maintain each of these manufactured home 
records at the plant where the home was produced. If that plant is no 
longer in existence, the manufacturer must keep the records at its 
nearest production plant in the same State, or, if such a plant does 
not exist, at the manufacturer's corporate headquarters.
    (f) Retailer and distributor records of corrections. When a 
retailer or distributor makes corrections necessary to bring a 
manufactured home into compliance with the construction and safety 
standards, the retailer or distributor must maintain a complete record 
of its actions.
    (g) 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, 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.

    Dated: February 4, 2011.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix to FR-5238-P-01: Prepublication Comments of the MHCC

    RE: HUD Proposed Rule on Subpart I for Consensus Committee 
Review and Comment
    In a letter dated February 15, 2006 the Secretary of the U.S. 
Department of Housing

[[Page 8867]]

and Urban Development (HUD) submitted a proposed rule to revise 
``Subpart I--Consumer Complaint Handling and Remedial Action'' in 
the Manufactured Home Procedural and Enforcement Regulations to the 
Manufactured Housing Consensus Committee (MHCC or consensus 
committee) for review and comment under Section 604(b)(3) of the 
Manufactured Housing Improvement Act of 2000 (2000 Act).
    In accordance with Section 604(b)(3) the consensus committee is 
providing the following written comments, including the attachments, 
to the Secretary for consideration and response.
    The consensus committee has thoroughly reviewed the Secretary's 
proposed rule and strongly disagrees with the Secretary's response 
that the proposed rule ``is the same as the recommendations 
submitted to the Secretary by the MHCC except for a few changes in 
the text'' or that the proposed rule ``incorporates almost all of 
the recommendations by the MHCC''. The Secretary's proposed rule 
makes substantial and significant modifications to the Subpart I 
proposal submitted by the MHCC to the Secretary in June 2005 for the 
Secretary's consideration pursuant to Section 604(b)(1) of the 2000 
Act.
    Additionally, the MHCC devoted almost all of the 20+ meetings 
referred to in the [HUD submittal] letter to the development of the 
MHCC Subpart I proposal. The MHCC's proposal was formally submitted 
to the Secretary in June 2005, and the MHCC then devoted two 
meetings to considering the Secretary's proposed changes to the MHCC 
proposal. Instead of either approving or rejecting the MHCC proposal 
with a written explanation within 120 days as required by Section 
604(b)(4) of the 2000 Act, the Secretary submitted his own proposal 
in the form of a proposed rule.
    On February 23, 2006, following a lengthy discussion, the MHCC 
adopted, by a 12 to 1 vote, a resolution stating: (1) The MHCC does 
not agree with the HUD proposed rule at this time; (2) The MHCC 
would submit comments to the proposed rule in accordance with the 
2000 Act that provides the MHCC 120 days to submit written comments, 
and (3) The MHCC written comments would include the MHCC's Statement 
of Principles that was used to develop the MHCC's Subpart I reform 
proposal, the text of the MHCC June 2005 consensus Subpart I reform 
proposal and written comments containing MHCC's specific 
disagreements with the Secretary's proposal.
    Our comments will be in three Sections:
    (Section 1) Formal re-submittal of the MHCC Subpart I Proposal 
along with the Principles we developed in order to guide us in 
proposing the changes contained in our Proposal as Attachments.
    (Section 2) Identification of the significant policy changes in 
the Secretary's proposed rule that are different from the Proposal 
submitted by the MHCC and the impact those policy changes will have 
on Consumer Complaint Handling and Remedial Actions.
    (Section 3) Identification of specific changes to Sections of 
the Secretary's proposed rule and the impact of making those 
changes.

Section 1: Formal Re-Submittal of MHCC Subpart I Proposal and the 
Principles Used bv the Consensus Committee To Draft the Proposal

    In accordance with the resolution adopted by the MHCC on 
February 23, 2006, the MHCC hereby formally re-submits to HUD its 
original consensus Subpart I reform proposal originally submitted on 
June 3, 2005, together with the consensus principles which it used 
to develop that proposal.
    The purpose of this re-submission is three-fold. First, the MHCC 
continues to believe that its consensus approach to Subpart I is 
more fair, reasonable and ultimately, more effective, than the 
Secretary's proposed rule and continues to urge its adoption. 
Second, the original MHCC consensus proposal contains differences 
from the HUD proposed rule that may not otherwise be addressed in 
detail in these comments. To the extent that such differences occur, 
the MHCC prefers and continues to support its consensus-based 
approach. Consequently, the text of the original proposal 
supplements and expands the comments contained herein. Third, HUD 
has not taken action on the MHCC's original consensus proposal as 
required by section 604(b)(4) of the 2000 Act. Under that section, 
if the Secretary rejects an MHCC-proposed regulation, the regulation 
and the Secretary's reasons for rejection must be published in the 
Federal Register within 120 days. Insofar as the MHCC's original 
proposal has never been published with the reasons for its 
rejection, it is both re-submitted under authority of section 
604(b)(1) and included as an integral part of these comments under 
authority of section 604(b)(3) which, among other things, requires 
the Secretary to publish the MHCC's comments together ``with the 
Secretary's response thereto.'' The public will thereby be assured 
an opportunity to review the MHCC proposal and the grounds for its 
rejection by the Secretary.
    1. Attachment A: MHCC Proposal
    2. Attachment B: Principles for amending Subpart I

Section 2: Significant Policy Changes in the MHCC Subpart I 
Proposal That the MHCC Continues To Recommend the Secretary 
Incorporate Into Any Proposed Rule To Update and Improve Subpart I

    The MHCC Subpart I proposal is based on a number of fundamental 
fairness concepts that have been rejected by the Secretary and 
deleted from the proposed rule that has been submitted to the MHCC 
for its consideration. Some but not all of these concepts are set 
forth below. The MHCC continues to believe that these concepts need 
to be included as part of any reform of Subpart I.
    A. Individual Accountability: The MHCC proposal contains the 
concept that if the retailer caused construction standard problems 
with the home, the retailer is accountable for fixing those 
problems. The Secretary's proposed rule deletes this retailer 
accountability and places that accountability with the manufacturer. 
This could cause significant problems in the dispute resolution 
process and does not hold the person accountable for the work they 
do. [HUD Note: the dispute resolution process is also subject to 
specific statutory requirements, which are separate from the 
statutory requirements that are the basis of today's proposed rule.]
    B. Retailer accountability: The basic premise of the MHCC 
consensus proposal is that Subpart I accountability should attach to 
the person responsible for causing a particular defect (or serious 
defect or imminent safety hazard). The MHCC concluded that the Act 
provides HUD with clear regulatory authority over retailers and 
distributors (among others). For example, retailers may be ordered 
to repair defects under the proposed federal Dispute Resolution 
Program. As a result, the MHCC proposal provides, in section 415(d), 
that retailers or distributors may be required to correct defects 
that they cause when their actions take a home out of compliance 
with the construction standards. This entire provision (and concept) 
is deleted from the HUD submission.
    C. Manufacturer accountability: As a corollary to its conclusion 
that defects should be addressed under Subpart I by the person or 
entity that caused them, the MHCC proposal provides that 
manufacturers are required to give notice of defects (section 
405(a)) and provide correction (section 415 (c)), when the defect is 
``caused'' by the manufacturer, ``including a person performing work 
or providing a component on behalf of the manufacturer.'' The MHCC 
concluded that it is fundamentally unfair to require a manufacturer 
(or any other party) to investigate, document and remedy a defect 
caused by another party. This conclusion is consistent with a 
reasonable reading of the Act and the current Subpart I, which 
recognizes exceptions for certain defects caused during 
transportation and by the homeowner. Again, this entire concept is 
deleted.
    D. Systematic introduction of defects: The Secretary's proposed 
rule actually imposes broader responsibility on manufacturers than 
now exists for defects caused by others, in that it deletes not only 
the MHCC's ``caused by'' language noted above, but also current 
Subpart I language which limits notification of defects to those 
``systematically introduced during the course of production.'' Under 
the HUD proposal, a manufacturer would be required to investigate 
any type of defect in more than one home, regardless of who 
introduced the defect and when it was introduced.
    E. New Program Responsibility: The MHCC proposal took into 
account the new program responsibility under the 2000 Act the 
Secretary has for finding and fixing installation problems and for 
resolving disputes about who will fix a problem between the 
manufacturer, the retailer and the installer by amending Subpart I 
with those potential new programs in mind.
    1. The MHCC proposal accomplished this by indicating the 
manufacturer must determine if he is responsible for any problems 
under the Standards (Construction or Installation) that could be 
classified a noncompliance, defect, serious defect, or imminent 
safety hazard,
    2. If the problem was not related to constructing the home, the 
manufacturer was to notify the appropriate retailer and installer, 
and

[[Page 8868]]

    3. The MHCC proposal clarified the Subpart I rules by only 
speaking to a manufacturer's responsibility for notification and 
correction of construction related problems under Subpart I. The 
MHCC believes any manufacturer responsibility for notification or 
correction of problems with installation or as an outcome of the 
dispute resolution process should be addressed in those program 
rules. The Secretary's proposed rule rejects this concept and re-
introduces generic notification requirements that are not specific 
to Subpart I issues. This continues the confusion and potential for 
misinterpretation of accountability.
    4. In addition to the hundreds of hours the MHCC spent revising 
Subpart I, the MHCC also spent many hours on developing principles 
for a Dispute Resolution Program. However, when reading HUD's 
proposed rule in total, the need for a Dispute Resolution Program 
becomes meaningless--the manufacturer is responsible for all 
defects.
    F. Installation-related defects: The MHCC proposal requires that 
corrections be made, under certain circumstances, to bring the home 
into compliance ``with applicable standards.'' This language 
recognizes the fact that under the 2000 Act HUD will soon be 
regulating installation; that the installation standards, as 
codified by HUD, are not part of the ``construction and safety 
standards;'' and that improper installation is responsible for many 
reported defects. These installation problems which are identified 
as part of a Subpart I investigation need to be referred to the 
installation program enforcement program for resolution. The HUD 
proposal rejects this concept by referring solely to bringing homes 
``into compliance with the construction and safety standards.''
    It should be noted that the MHCC does not agree with HUD's 
premise that Federal installation standards which it adopts under 
section 605 of the Act do not constitute Federal Manufactured 
Construction and Safety Standards within the meaning and intent of 
the Act. The public comments filed by the MHCC on June 23, 2005 in 
connection with HUD Rulemaking Docket No. FR-4928-P-01, reiterates 
MHCC's position that the Federal installation standards fall within 
the statutory definitions of ``manufactured home construction'' 
(Sec. 603(1)) and ``manufactured home safety,'' (Sec. 603(8)) 
insofar as they relate to the ``assembly'' and ``performance'' of 
the home.
    G. One file: The MHCC spent a lot of time debating the current 
cumbersome paperwork process and duplicate file requirements that 
the existing enforcement and Subpart I regulations require. To 
reduce this paperwork process we recommended that Subpart I 
documentation be put in the home's service records maintained by the 
manufacturer. If this happened, the service records would contain 
all the problems identified for a home and could be a primary source 
of information to conduct Subpart I investigations for problems 
caused by patterns of construction.
    1. Not only did the Secretary reject this concept, the proposed 
rule restricts what information regarding construction problems you 
could look for in the service records,
    2. The Secretary's proposed rule continues to require separate 
Subpart I files,
    3. The Secretary's proposed rule requires all services records 
to contain certain information in a specific format for any 
information the manufacturer wishes to put in its service records, 
thus increasing the amount of paperwork over existing requirements 
and
    4. The Secretary's proposed rule has new reporting requirements 
during the initial 30 days, for reporting a potential serious defect 
or imminent safety hazard to the Secretary, the SAA in the State of 
manufacturer and the manufacturer's IPIA. These same problems 
require a plan of notification under the proposed 3282.405 which 
must be sent for approval 20 days after initial determination. This 
requirement for duplicate notification focuses the effort on 
paperwork compilation as opposed to timely fixing of the homeowner's 
problem and finding any additional homes that may have the problem.
    H. Service Record: The Secretary's proposed rule has new 
paperwork requirements placed on every home by dictating that every 
service record for each home have specific, and many times 
duplicate, information from other manufacturer filing systems such 
as production checklists, production correction notices, etc. 
However, the class determinations under Subpart I do not have to be 
in these files. The MHCC did not propose such an increase in 
paperwork and believes this increase in an already burdensome 
paperwork process takes the focus away from fixing the home.
    I. Increased Secretary Involvement to the Detriment of the SAA: 
In several places through-out the proposed rules information is now 
required to be sent to the Secretary or the manufacturer can go 
directly to the Secretary rather than deal with the SAA in the State 
of manufacturer. This potential for by-passing the States which are 
in partnership with the Secretary in the Administration of the 
program would allow the manufacturer to determine whether the SAA or 
the Secretary would be more lenient to the detriment of the 
homeowner. Additionally, the Secretary's staffing is so limited 
timeliness of response would be an issue. The MHCC proposal did not 
recommend such procedures and continued to rely on the States 
fulfilling their responsibilities.
    J. Vague and Subjective Wording: In the pivotal section 
concerning manufacturers determinations the HUD proposal requires 
manufacturers to conduct inspections of ``service records'' of homes 
of the same design or construction if a defect, serious defect or 
imminent safety hazard ``would be readily reportable'' by consumers 
or retailers. This is extremely subjective and requires guesswork by 
manufacturers as to what would or would not be ``readily 
reportable'' and whether or not the Secretary or an SAA would agree. 
Given the possibility of criminal penalties under the Act, 
speculation and guesswork should not be a component of Subpart I.
    K. ``Possible'' versus ``Likely'' as the Basis for Preliminarv 
Determinations: Section 612(a) of the Secretary's proposed rule 
allows the Secretary or an SAA to make a preliminary determination 
mandating notification if either has information ``indicating'' that 
a defect, serious defect, or an imminent safety hazard ``possibly 
exists.'' The original MHCC consensus proposal authorized a 
preliminary determination if the Secretary or SAA has information 
which ``likely indicates'' the existence of a defect or a more 
serious problem. The difference is important. One of the purposes of 
the MHCC proposal is to move away from the paperwork caused by the 
subjective and the speculative and focus on getting known problems 
fixed. To require notification of a ``possible'' defect effectively 
requires manufacturers to prove a negative--the non-existence of a 
defect in order to avoid the costs and stigmatization that are part 
of a notice campaign. The MHCC also adopted this standard in order 
to provide the same threshold standard for determinations by both 
manufacturers and the Secretary/SAAs--i.e., likely existence of a 
defect or more serious problem. Under the HUD proposal, speculation 
regarding ``possible'' defects is reintroduced and differing 
thresholds are imposed for determinations made by manufacturers 
versus eterminations made by regulators.

Section 3: Specific Language Changes Recommended bv the MHCC To the 
Proposed Rule Submitted to the MHCC for Review and Comment

    The MHCC offers the following recommended changes with comments 
to the Secretary's Proposed rule in accordance with Section 
604(b)(3) of the 2000 Act.
    A. 3282.7 (j): Secretary's proposed rule is the same as the MHCC 
proposal. MHCC agrees.
    B. 3282.7(v): Secretary's proposed rule is the same as the MHCC 
proposal. MHCC agrees.
    C. 3282.7(dd): Secretary's proposed rule except for a 
grammatical change is the same as the MHCC proposal. MHCC agrees.
    D. 3282.362(c)(1) New sentence: The Secretary's proposed rule is 
significantly different from MHCC proposal in the following ways:

--Requires the IPIA to look at all information the manufacturer 
would be required to keep including transporter checklists, retailer 
name and address, correspondence with retailer, and homeowner 
service work orders etc. None of this information is related to 
Subpart I problems
--Does not focus the IPIA's efforts to look at information on 
problems with the home because the review efforts are so generic
--Greatly increases IPIA responsibilities with little perceived 
benefit
--Section 2 comments under G, H, and J in this letter relate to the 
changes in this Section

    MHCC recommends the Secretary adopt the MHCC wording for the new 
sentence in 3282.362(c)(1) and delete the wording in the proposed 
rule
    E. 3282.401 Purpose and Scope: Secretary's proposed rule adds 
distributors to manufacturers and retailers in the MHCC proposal. 
MHCC agrees.
    F. 3282.402 General Provisions: Secretary's proposed rule is the 
same as the MHCC proposal. MHCC agrees.
    G. 3282.403 Consumer complaint and information referral: 
Secretary s proposed

[[Page 8869]]

rule is the same as the MHCC proposal. MHCC agrees.
    H. 3282.404 Manufacturers' determinations and related 
concurrences: Secretary's proposed rule is significantly different 
from the MHCC proposal in the following ways:

--Requires new reporting requirements to the Secretary, the SAA in 
the State of manufacturer and the manufacturer's IPIA during the 
first 30 critical days when the focus should be on finding and 
determining the scope of the problem and preparing the plan to fix 
the problem; not on paperwork. These regulators will be notified 
within 20 more days anyway with the plan of correction and 
notification as required by 3282.408
--Broadens manufacturer's current responsibilities for problems 
caused ``during the course of production'' to anything and rejects 
the MHCC proposal that persons should be accountable for the work or 
changes to the house they do. For example, one of the common 
problems in the field found during consumer complaint handling is 
the taking of fixtures out of one home and putting them in another 
home, sometimes incorrectly. The retailer who did this work should 
be accountable not the manufacturer. The Secretary's proposal 
rejects this notion
--The MHCC proposal included the referral to the installer and 
retailer but could not comment further since the MHCC has not seen 
the Secretary's final rule governing dispute resolution corrective 
actions
--Rejects the MHCC's attempt to reduce paperwork by riling Subpart I 
problems in the service records and then restricts service record 
review to items that ``would be readily reportable by consumers or 
retailers'' (whatever that means)
--Section 2 comments in C, D, E, F, G, H, I, and J in this letter 
relate to the changes in this Section

    MHCC recommends the Secretary adopt the wording for Section 
3282.404 in the MHCC proposal and delete the wording in the proposed 
rule
    I. 3282.405 Notification pursuant to manufacturer s 
determination: The Secretary's proposed rule is significantly 
different than the MHCC proposal in the following ways:

--Expands manufacturer's current responsibilities for notification 
from problems found during the course of production for imminent 
safety hazard (imminent and unreasonable risk of death or severe 
personal injury) and serious defect (renders a part of the home not 
fit for ordinary use or results in unreasonable risk of injury) to 
any problem found in more than one home. The MHCC believes that to 
hold the manufacturer accountable for notification for work it did 
not do (outside the course of production) is not fair and holds the 
wrong person accountable
--Significantly expands the paperwork of manufacturers by requiring 
the manufacturer to prepare a plan for notification for every 
problem they receive, even if Subpart I requires them to do nothing 
or only one home was affected
--Section 2 comments in A, B, D, E, F, and J in this letter relate 
to the changes in this Section

    MHCC recommends the Secretary adopt the wording for Section 
3282.405 in the MHCC proposal and delete the wording in the proposed 
rule
    J. 3282.406 Required manufacturer correction: Secretary's 
proposal is more limiting than the MHCC proposal in the following 
way:

--The Secretary's proposal limits the manufacturer's correction to 
items that are construction and safety standards. The Secretary has 
interpreted the 2000 Act to exclude from construction and safety 
standards any item that is considered by the Secretary to be part of 
the installation standards. Close up of multi-section homes was 
historically considered part of the construction and safety 
standards (now in the installation standard) and manufacturer 
responsibilities for problems caused during the installation set-up 
may require correction. That is why the MHCC proposal included 
applicable standards
--Section 2 comments in A, E, and F in this letter relate to the 
changes in this Section

    MHCC recommends the Secretary adopt the wording for Section 
3282.406 in the MHCC proposal and delete the wording! in the 
Secretary's proposal
    K. 3282.407 Voluntary compliance with the notification and 
correction requirements under the Act: Secretary's proposed rule 
uses different wording than the MHCC proposal but the intent seems 
to be the same. MHCC agrees
    L. 3282.408 Plan of notification required: Secretary's proposed 
rule is the same as the MHCC proposal. MHCC agrees
    M. 3282.409 Contents of plan: Secretary's proposed rule has 
grammatical edits from the MHCC proposal. MHCC agrees
    N. 3282.410 Implementation of Plan: Secretary's proposed rule 
and the MHCC proposal is the same. MHCC agrees
    O. 3282.411 SAA Initiation of remedial action: Secretary's 
proposed rule is completely different from the MHCC proposal in the 
following ways:

--MHCC proposal included a timeline for the Secretary's initiation 
remedial action. The Secretary's proposed rule deletes all 
references to when the Secretary will initiate remedial action. The 
MHCC believes it is reasonable to have the Secretary indicate when 
he would initiate remedial action
--The Secretary's proposed rule allows a State to refer a problem to 
either the State of manufacture or the Secretary. Historically, the 
States as partners with the Secretary handled the day to day 
activities of the program such as subpart I matters in their State. 
This change would allow for bypassing of the State and going 
directly to the Secretary at any time
--The Secretary's proposed rule allows for initiation of 
administrative review by a State when the State has information that 
a problem possibly exists. This is the same as the MHCC proposal. 
However, the MHCC proposal indicated this initiation must be based 
on the same information that the manufacturer had. If the State has 
new information they should refer that information to the 
manufacturer for possible adjustment of their position before the 
regulator arbitrarily steps in
--Section 2 comments in A, C, D, I, J, and K in this letter relate 
to the changes to in this Section

    MHCC recommends the Secretary adopt the wording for Section 
3292.411 in the MHCC proposal and delete the wording in the proposed 
rule
    P. 3282.412 Preliminary and final administrative determinations: 
Secretary's proposed rule is significantly different from the MHCC 
proposal in the following ways:

--The Secretary's proposal allows for making a preliminary 
determination based on a decision that a defect ``possibly exists'' 
versus the MHCC proposal that allows for initiation of 
administrative review but requires the regulator to make a 
determination when the information rises to the level of ``likely 
exists''. The MHCC proposal requires the manufacturer to provide 
enough information to the regulator to make such a determination and 
provides for the regulator to make preliminary determination if the 
manufacturer failed to do so. The MHCC believes that adoption of its 
position would move the program away from paperwork notification of 
speculative items and focus on getting known problems identified and 
fixed
--Section 2 comments in J and K in this letter relate to the changes 
in this Section

    MHCC recommends the Secretary adopt the wording for Section 
3282.412 in the MHCC proposal and delete the wording in the proposed 
rule
    Q. 3282.413 Implementation of Final Determination: Secretary's 
proposed rule is the same as the MHCC proposal except for some 
grammatical changes. MHCC agrees
    R. 3282.414 Replacement or repurchase of homes after sale to 
purchaser: Secretary's proposed rule is the same as the MHCC 
proposal. MHCC agrees
    S. 3282.415 Correction of homes before sale to purchaser: 
Secretary's proposed rule is significantly different from the MHCC 
proposal in the following ways:

--The Secretary's proposed rule removes the concept of persons being 
accountable for the work they do by holding the manufacturer 
accountable for work done by others over which the manufacturer has 
no control
--The Secretary's proposed rule makes the new dispute resolution 
process in the 2000 Act null and void by holding the manufacturer 
accountable for everything including retailer work that would be 
part of a dispute
--Section 2 comments in A, B, C, D, E, F, and J in this letter 
relate to the changes in this Section

    MHCC recommends the Secretary adopt the wording in Section 
3282.415 in the MHCC proposal and delete the wording in the proposed 
rule
    T. 3282.416 Oversight of notification and correction activities: 
The Secretary's proposed rule has grammatical changes and

[[Page 8870]]

a change that limits SAA (State) oversight to construction standards 
as defined in this subpart which is different from the MHCC proposal 
in the following ways:

--The MHCC proposal indicated ``Standards'' due to the placement of 
close-up of the home in the installation standards. Close-up is 
currently viewed as construction and safety standards. By limiting 
State oversight to the Subpart I definition of construction and 
safety standards, the Secretary's proposed rule would potentially 
have a body of work no longer regulated for correction of problems
--Section 2 comments in E, F, and J in this letter relate to the 
changes in this Section

    MHCC recommends the Secretary adopt the working for Section 
3282.416 in the MHCC proposal and delete the wording in the proposed 
rule
    U. 3282.417 Recordkeeping requirements: The Secretary's proposed 
rule is significantly different from the MHCC proposal in the 
following ways:

--The Secretary's proposed rule rejects the concept of one file for 
the recording and tracking of problems found with the home when it 
is out in the community which would reduce current paperwork 
requirements
--The Secretary's proposed rule adds new paperwork requirements by 
requiring manufacturers to put information in service records that 
is in separate filing systems such as the information about 
corrections made to the home during production
--The Secretary's proposed rule describes what should be the service 
file how it should be organized and includes information that does 
not relate to fixing problems with the home
--Section 2 comments in C, D, G, H, I, and J in this letter relate 
to the changes in the Section.


    MHCC recommends the Secretary adopt the wording for Section 
3282.417 in the MHCC proposal and delete the wording in the proposed 
rule
    V. 3282.418 Factors for appropriateness and amount of civil 
penalties: Secretary's proposed rule is the same as the MHCC 
proposal. MHCC agrees
    While consumers, the industry and the general public, as 
represented on the MHCC, have embraced the 2000 Act, it appears that 
others have not. The MHCC urges the Secretary to reconsider his 
proposed changes to Subpart I in the proposed rule. The MHCC 
recommends that the Secretary adopt the proposed rule changes 
recommended by the MHCC that carry out the intent of the 2000 Act 
and the principles used by the MHCC in developing the Subpart I 
reform proposal that was sent to the Secretary.

[FR Doc. 2011-2907 Filed 2-14-11; 8:45 am]
BILLING CODE 4210-67-P