HUD Publishes Proposed Subpart I Rule

Attached is a copy of a HUD proposed rule to amend Subpart I (Consumer Complaint Handling and Remedial Actions) of the Procedural and Enforcement Regulations, published in the Federal Register on February 15, 2011. It is important that you carefully review this proposed rule with your regulatory, technical and legal personnel for any possible input, as MHARR will be submitting comments to HUD on behalf of manufacturers. In addition, both this proposal and MHARR's analysis of its elements and potential impact will be fully addressed at MHARR's upcoming meeting in Tunica, Mississippi. Written comments on the proposed rule are due on or before April 18, 2011.

By way of background, the issue of Subpart I reform was initially raised by MHARR in a Petition for Rulemaking submitted to HUD in the aftermath of the Manufactured Housing Improvement Act of 2000, but prior to the formal organization of the Manufactured Housing Consensus Committee (MHCC). This was prompted by HUD abuses of Subpart I in the late 1990's that were so serious they ultimately facilitated and speeded-up the passage of the 2000 law but also threatened the survival of a number of smaller manufacturers.

MHARR maintained in that Petition that specific aspects of Subpart I were unnecessarily costly and burdensome, offered no corresponding benefits for consumers, and should be modified based on the purposes of the 2000 law which, among other things, require that "the public interest in … affordable manufactured housing" be "duly considered in all determinations relating to the federal standards and their enforcement."

HUD deferred action on MHARR's Petition pending the imminent formation of the MHCC, but after the MHCC was constituted the Committee turned to Subpart I as one of its first items of business. There then followed — after hundreds of hours of committee and subcommittee debate — two MHCC Subpart I reform proposals (incorporating many significant elements of MHARR's original Petition), that were rejected by HUD — the first in 2003 and the second in 2006. HUD subsequently submitted its own Subpart I modifications to the MHCC, which the Committee refused to endorse, electing instead to formally re-submit its own second proposal, together with comments on the HUD document.

The proposed rule that has now been published by HUD, incorporates the HUD proposal that did not achieve the consensus endorsement of the MHCC, together with certain changes based on the comments of the MHCC and some elements of the earlier MHCC-approved proposals.

This background is relevant because Subpart I is one of the most complex components of the entire HUD regulatory system. As a result, the HUD proposed rule will need to be carefully scrutinized in light of this history, as well as the existing regulations, their interpretation by HUD, and their actual enforcement in the field, in order to determine the precise impact of the proposed rule on manufactured housing producers and consumers, and submit appropriate comments. In addition, because of HUD's expansion of in-plant enforcement through de facto regulations and revelations growing out of HUD's November 2010 "Auditors Meeting" that these new mandates will be enforced through and overlapped with Subpart I, MHARR's comments will need to address even greater problems that could result in the future.

Moreover, and particularly in light of MHARR's current approach to Congress, the association's comments will need to address both HUD's interaction with the MHCC, its continuing refusal to accept significant MHCC recommendations, and its failure to return to the MHCC with the current proposal, which represents a hybrid of various approaches, for further input and recommendations.

All that said, though, at this time, based on a very preliminary review of the proposed rule, that a number of concepts originally advanced by MHARR to reduce the cost of Subpart I and eliminate at least some of its red tape, paperwork and investigatory burdens have been included in the HUD proposal. The most important of these include: (1) elimination of the vague and unreasonable "possibly exists" or "may exist" trigger for investigations of alleged defects reported to the manufacturer; (2) a new "likely exists" trigger for manufacturer investigation of alleged defects; (3) a "good faith" standard for manufacturer investigations.

Over the next few weeks, MHARR will thoroughly analyze this proposal and will begin to prepare appropriate comments for submission to HUD. We will continue to keep you fully updated as this process goes forward, and shall fully address them at the MHARR upcoming meeting in Tunica, MS.

Manufactured Housing Association for Regulatory Reform
1331 Pennsylvania Ave N.W., Suite 508
Washington, D.C. 20004
Phone: 202/783-4087
Fax: 202/783-4075
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