61178 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Parts 3280, 3282 and 3288 

[Docket No. FR–4813–P–02; HUD–2005– 

0038] 

RIN 2502–AH98 

Manufactured Housing Dispute 

Resolution Program 

AGENCY: Office of the Assistant 

Secretary for Housing-Federal Housing 

Commissioner, HUD. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

establish a federal manufactured 

housing dispute resolution program and 

guidelines for the creation of stateadministered dispute resolution 

programs. Under the National 

Manufactured Housing Construction 

and Safety Standards Act of 1974, as 

amended by the Manufactured Housing 

Improvement Act of 2000, HUD is 

required to establish a program for the 

timely resolution of disputes among 

manufacturers, retailers, and installers 

of manufactured homes regarding 

responsibility, and the issuance of 

appropriate orders, for the correction or 

repair of defects in manufactured homes 

that are reported during the one-year 

period beginning on the date of 

installation. 

DATES: Comment Due Date: December 

19, 2005. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this rule to the Regulations Division, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 Seventh Street, SW., Room 10276, 

Washington, DC 20410–0500. Interested 

persons may also submit comments 

electronically through either: 

• The Federal eRulemaking Portal at: 

http://www.regulations.gov; or 

• The HUD electronic Web site at: 

http://www.epa.gov/feddocket. Follow 

the link entitled ‘‘View Open HUD 

Dockets.’’ 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.epa.gov/ 

feddocket. 

FOR FURTHER INFORMATION CONTACT: 

William W. Matchneer III, 

Administrator, Office of Manufactured 

Housing Programs, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 9164, 

Washington DC 20410; telephone (202) 

708–6401 (this is not a toll-free 

number). Persons with hearing or 

speech impairments may access this 

number via TTY by calling the toll-free 

Federal Information Relay Service at 

(800) 877–8389. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Requirement for a Dispute Resolution 

Program 

The National Manufactured Housing 

Construction and Safety Standards Act 

of 1974 (the Act) (42 U.S.C. 5401–5426) 

is intended, in part, to protect the 

quality, safety, durability, and 

affordability of manufactured homes. 

The Act was amended on December 27, 

2000, by the Manufactured Housing 

Improvement Act of 2000, Public Law 

106–569, to require HUD, among other 

things, to establish and implement a 

new manufactured housing dispute 

resolution program for states that choose 

not to operate their own dispute 

resolution programs and to establish 

guidelines for the creation of stateadministered dispute resolution 

programs. Specifically, section 

623(c)(12) of the Act (42 U.S.C. 

5422(c)(12)) calls for the 

implementation of ‘‘a dispute resolution 

program for the timely resolution of 

disputes between manufacturers, 

retailers, and installers of manufactured 

homes regarding responsibility, and for 

the issuance of appropriate orders, for 

the correction or repair of defects in 

manufactured homes that are reported 

during the 1-year period beginning on 

the date of installation.’’ A state is not 

required to be a state administrative 

agency (SAA) under HUD’s 

manufactured housing program to 

administer its own dispute resolution 

program. However, any state submitting 

a state plan to change its status from a 

nonparticipating state to a conditionally 

or fully approved SAA after December 

26, 2005, must provide for such a 

dispute resolution program as part of its 

plan. Any state that is conditionally or 

fully approved on December 26, 2005, 

will not be required to include a dispute 

resolution program in its state plan as 

long as the state maintains conditional 

or full approval status. Section 623(g)(2) 

of the Act also requires HUD to 

implement, beginning on December 27, 

2005, a HUD Manufactured Housing 

Dispute Resolution Program that will 

meet the above requirements in any 

state that has not established a program 

that complies with the Act. 

Advance Notice of Proposed 

Rulemaking 

On March 10, 2003 (68 FR 11452), 

HUD issued an Advance Notice of 

Proposed Rulemaking (the ANPRM) 

asking for comments on how the federal 

manufactured housing dispute 

resolution program should be structured 

and implemented. Seven state agencies, 

several statewide and national 

manufacturing housing associations, 

individuals, the Manufactured Housing 

Consensus Committee (MHCC), and 

other organizations, such as consumer 

groups and dispute resolution 

organizations, submitted comments. 

References to the comments received on 

a particular issue are made throughout 

this preamble. 

II. Principle Behind Proposed Rule For 

the HUD-Administered Program 

General 

In designing the HUD Manufactured 

Housing Dispute Resolution Program to 

operate in HUD-administered states, 

HUD considered the approaches of 

existing state dispute resolution 

programs, examined various dispute 

resolution processes, and consulted 

with experts at the Department of 

Justice. Many commenters, including 

the MHCC, encouraged the creation of a 

dispute resolution process that 

incorporated the widely accepted 

processes of mediation, negotiation, and 

arbitration. HUD considered these 

processes carefully, as well as 

alternative approaches used in some 

state programs. HUD proposes the 

program described below as a way to 

achieve several goals. First, the dispute 

resolution program should be based on 

processes widely accepted by the 

alternative dispute resolution 

community and that have been proven 

to be successful in resolving disputes. 

Second, the program must be fair and 

expeditious. Third, the dispute 

resolution program must be easily 

accessible to all likely users. 

Specifically, the program should 

include homeowners, as well as 

manufacturers, retailers, and installers 

that are mentioned in the Act. The 

proposed program establishes 

procedures to resolve disputes among 

manufacturers, retailers, and installers. 

Although the Act does not require their 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 61179 

participation, HUD views homeowners 

as an integral part of the dispute 

resolution process. The MHCC and the 

majority of commenters favored the 

participation of homeowners. Virtually 

all commenters acknowledged a role for 

the homeowners in initiating the 

dispute resolution process and the value 

of homeowner input in the process. In 

its comments, the MHCC recommended 

that ‘‘Any party to the process (the 

consumer, manufacturer, retailer or 

installer) should be permitted to initiate 

the dispute resolution process.’’ The 

MHCC also stated that ‘‘Consumers are 

eligible to participate in the process if 

they desire.’’ Fourth, the program 

should conserve the resources and 

expenses of all of the parties and the 

Department. 

The degree to which HUD has 

authority to use additional approaches 

to meet this last goal is currently being 

examined. For example, the MHCC and 

commenters have recommended that 

parties that use and receive the benefits 

of the dispute resolution process in 

specific cases pay at least a portion of 

the direct costs associated with the 

program in those cases. This is an 

approach used by many states that 

currently have dispute resolution 

programs. Such user charges would 

generally not be intended to cover the 

purely administrative costs to HUD of 

implementing the program, but might 

include a filing fee to initiate a dispute 

resolution process, a fee to initiate 

arbitration, and the assessment of 

arbitration costs to a losing party. Other 

administrative costs of the program in 

HUD-administered states would be 

funded as general program expenses. 

HUD is currently reviewing this 

approach and will not introduce a userfee approach until HUD’s authority on 

the approach is clear. Nevertheless, 

HUD is requesting comments on the 

advisability of incorporating such fees 

in HUD-administered states. If user fees 

are incorporated, what are appropriate 

amounts to be paid for what services? 

Should homeowners be required to pay 

any fees? If the dispute goes to 

arbitration, should all fees be paid by 

the party or parties determined to be 

responsible for the defect? 

For the Federal program, HUD 

proposes the use of two widely accepted 

methods of dispute resolution, as well 

as an opt-out provision that would 

allow commercial entities an 

opportunity to resolve disputes outside 

the federal program. The program would 

employ elements of mandatory 

mediation and nonbinding arbitration. 

Several commenters, including the 

MHCC, suggested using a combination 

of mediation and arbitration for the 

federal program. 

Mediation is a process that uses a 

neutral party or mediator to facilitate 

discussion between disputing parties. 

The primary goal of mediation is to have 

parties reach a mutually agreeable 

solution to their dispute. The mediator 

acts as a guide throughout the process 

and helps the parties to focus on the 

issues in order to reach an agreement. 

The mediator does not have final 

decision-making authority. Arbitration 

is an adjudicative process in which a 

neutral person, or a panel of neutral 

persons, makes a ruling after 

considering written evidence, oral 

argument, or both. 

The objective of the dispute 

resolution program proposed by HUD is 

to resolve most requests for dispute 

resolution before arbitration and thereby 

minimize the cost to parties. HUD 

expects that a substantial number of 

potential disputes would be resolved 

through the Commercial Opt-Out 

Option. At appropriate times after the 

federal program is implemented, the 

Secretary will review the structure of 

the program and make modifications as 

necessary, using notice-and-comment 

rule-making procedures. The Secretary 

will check for any indication that the 

program discourages or impedes direct 

negotiation among the affected parties 

themselves and, if so, will try to modify 

the program to avoid this undesirable 

consequence. The proposed program 

reflects the Executive Branch’s 

emphasis on utilizing dispute resolution 

processes to resolve conflicts in a costeffective and expeditious manner, as 

well as on fostering good government by 

giving parties the opportunity to resolve 

disputes amicably and creatively 

through alternative dispute resolution. It 

also dovetails with Congress’ active 

promotion of alternative dispute 

resolution as set forth in the 

Administrative Dispute Resolution Act 

of 1996 (5 U.S.C. 571 et seq.). 

Relationship With Notification and 

Correction Requirements 

The proposed program is also not 

inconsistent with other requirements of 

the Act. For example, nothing in these 

regulations absolves the manufacturer of 

its notification and correction 

requirements under subpart I of 24 CFR 

part 3282 (Subpart I). Nothing in either 

a state or the Federal Dispute Resolution 

Program will interfere with Subpart I. 

Subpart I is based on the statutory 

requirements in sections 613 and 615 of 

the Act (42 U.S.C. 5412 and 5414), 

while the authority for the dispute 

resolution program is found under 

section 623 of the Act (42 U.S.C. 5422). 

Section 615 imposes upon 

manufacturers certain specific 

requirements for notification and 

correction when a manufactured home 

does not comply with the Manufactured 

Home Construction and Safety 

Standards in part 3280 or contains an 

imminent safety hazard. Section 613 of 

the Act requires manufacturers to 

correct or replace homes sold to retailers 

that have not yet been sold to 

purchasers. Nothing in section 623 of 

the Act changes the requirements in 

sections 613 and 615. 

If this proposed rule is implemented, 

manufacturers would continue to be 

responsible for compliance with 

Subpart I, and HUD and the SAAs 

would continue to have authority to 

assure and enforce manufacturers’

compliance with Subpart I. Sections 613 

and 615 of the Act do not provide 

authority for any consumer enforcement 

of the notification and correction 

requirements, and are distinguishable 

from section 623 of the Act, which 

provides authority for the dispute 

resolution program. If a manufacturer 

receives a homeowner complaint about 

a manufactured home, the manufacturer 

has received information that triggers its 

Subpart I responsibilities. However, a 

homeowner does not trigger the dispute 

resolution process unless the 

homeowner follows the specific steps 

provided in this proposed rule. Thus, 

the dispute resolution program provides 

an additional homeowner protection 

mechanism. 

III. Program Administration for the 

HUD-Administered Program 

HUD interprets the language set forth 

in section 623(g)(3) of the Act (42 U.S.C. 

5422(g)(3)) as permitting the use of 

contractors in the implementation of the 

dispute resolution program in HUDadministered states. HUD anticipates 

using contractors as screening neutrals, 

mediators, and arbitrators. HUD also 

anticipates that the contractors used 

would be required to become familiar 

with HUD’s manufactured housing 

program, as many commenters, 

including the MHCC, recommended. 

HUD acknowledges, however, that 

dispute resolution experts emphasize 

that a primary consideration for 

selecting neutrals, mediators, and 

arbitrators should be their background 

and experience in dispute resolution. 

Independence is also an important 

factor. 

The HUD Manufactured Housing 

Dispute Resolution Program would be 

governed by the Administrative Dispute 

Resolution Act, 5 U.S.C. 571 et seq. The 

proposed dispute resolution program 

consists of six parts, in addition to the 

61180 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 

opt-out option. The six components are: 

Initial Notification of a Problem, 

Initiating Dispute Resolution, Intake and 

Screening, Mediation, Nonbinding 

Arbitration, and Secretarial Review. 

Commercial entities, when they are the 

only parties involved in a dispute 

concerning who is responsible for 

correcting a defect, may elect to opt out 

of the HUD Manufactured Housing 

Dispute Resolution Program. The 

commercial entities would then engage 

in a neutral evaluation process of their 

own design. The dispute resolution 

program will be applicable to 

manufactured homes installed after 

December 27, 2005, or the effective date 

of a final rule, whichever is later. Under 

the HUD Manufactured Housing 

Program, alleged defects must be 

reported to the manufacturer, retailer, 

installer, or HUD within one year of the 

date of installation of the manufactured 

home, in order to be eligible for the 

dispute resolution program. 

IV. HUD Manufactured Housing 

Dispute Resolution Program in HUDAdministered States 

As noted previously, HUD will 

administer its dispute resolution 

program only in states that choose not 

to operate their own dispute resolution 

programs. The following discussion of 

the HUD-administered program will not 

be germane in any state that through 

state law adopts and implements its 

own qualifying dispute resolution 

program and certifies its program to 

HUD as described in Section VI of this 

preamble. 

A. Initial Notification of a Problem 

As previously discussed, alleged 

defects that can be referred into the 

dispute resolution program must be 

reported within the first year after the 

date of home installation. As used in 

HUD’s Manufactured Housing Dispute 

Resolution Program and this new part 

3288, the term ‘‘defect’’ is defined to 

parallel its definition in the Act. 

Accordingly, the proposed rule also 

makes clear for the dispute resolution 

program that the term ‘‘defect’’ covers 

each defect in the installation, 

construction, or safety of the home. 

Commenters familiar with HUD’s longestablished program for manufactured 

housing construction and safety 

standards are likely to be accustomed to 

using the term ‘‘defect’’ in a narrower 

way. In regulations implementing the 

historical aspects of HUD’s 

manufactured housing program, the 

term has been defined to encompass 

only construction and safety standards, 

and to exclude matters that implicated 

significant health and safety issues. See 

the definition in § 3282.7(j). For 

purposes of the dispute resolution 

program, however, a defect is any 

problem in the performance, 

construction, components, or material of 

the home that renders the home or any 

part of it not fit for the ordinary use for 

which it was intended, including but 

not limited to a defect in the 

construction, safety, or installation of 

the home. In reviewing this proposed 

rule and preparing comments, 

commenters should be mindful of the 

broader use of the term as it applies to 

rights and responsibilities established 

under this new part 3288, as 

distinguished from the term’s historical 

use in the program in part 3282. 

As previously discussed, alleged 

defects must be reported within one 

year of the date of home installation. 

The Department strongly encourages the 

parties, especially homeowners, to seek 

to resolve disputes directly with the 

party or entities that they believe to be 

responsible before initiating the federal 

manufactured housing dispute 

resolution process. Nevertheless, all 

parties, including homeowners, must 

report the existence of possible defects 

within the one-year period in order to 

preserve the option of initiating the 

federal manufactured housing dispute 

resolution process. The Department 

recommends that reports of defects be 

made in writing, including but not 

limited to email, written letter, certified 

mail, or fax. Reports would also be 

permitted by telephone. A report of a 

defect should, at a minimum, include a 

description of the alleged defect. Parties 

alleging defects are encouraged to send 

any written correspondence via certified 

or express mail, so that there would be 

proof of date of delivery. The 

Department welcomes comments on 

effective ways for homeowners to report 

the existence of defects. After reporting 

a defect, the reporting party would be 

encouraged to allow time for a 

satisfactory response before initiating 

the HUD Manufactured Housing Dispute 

Resolution Program after having 

reported a problem. 

B. Initiating the Process 

Parties may initiate the federal 

manufactured housing dispute 

resolution process by submitting a 

request for dispute resolution to the 

dispute resolution provider or by calling 

a toll-free number. Requests for dispute 

resolution may come from homeowners, 

retailers, manufacturers, or installers. 

C. Intake and Screening 

Once the request for dispute 

resolution has been received by the 

dispute resolution provider, the 

Screening Neutral would review the 

sufficiency of the information provided 

with the request for initiation of a 

dispute resolution process. If a defect is 

properly alleged, the Screening Neutral 

would forward the request for 

mediation. If the Screening Neutral 

determines there is sufficient 

documentation of a defect presenting an 

unreasonable risk of injury or death, a 

copy of the request would be sent to 

HUD. If a request is lacking any of the 

required information, the Screening 

Neutral would contact the requester in 

order to supplement the initial request. 

The specific time periods for intake and 

screening are not codified because the 

Department anticipates establishing 

these directly as part of the contracting 

process with the third-party dispute 

resolution provider. HUD will, however, 

publicize these time periods on its 

website. The Department is interested in 

comments on this plan for establishing 

and announcing the intake and 

screening schedules. 

D. Mandatory Mediation 

The second stage in the process is 

mandatory mediation. The dispute 

resolution provider would select a 

mediator, who would be a different 

individual from the Screening Neutral 

used during the intake and screening 

process. The mediator would mediate 

the dispute and attempt to facilitate a 

settlement. The parties would be given 

30 days to reach a settlement. For cases 

involving defects presenting an 

unreasonable risk of injury, death, or 

significant loss or damage to valuable 

personal property, the parties would 

have a maximum of 10 days to reach an 

agreement. Sample agreements would 

be made available to the parties as 

drafting guidance. Upon reaching and 

signing an agreement, copies of any 

settlements reached would be forwarded 

to the parties and to HUD by the 

mediator. All other documents and 

communications used in the mediation 

would be confidential, in accordance 

with the Administrative Dispute 

Resolution Act of 1996 (5 U.S.C. 571 et 

seq.). Once the settlement agreement is 

signed, the corrective repairs must be 

completed within 30 days, unless a 

longer period is agreed to by the 

homeowner and the parties. The MHCC 

commented that a 30-day period seemed 

an appropriate time in which to 

complete corrective repairs. Additional 

comments on the reasonableness of the 

periods are requested. 

E. Nonbinding Arbitration 

The third stage that may be invoked 

is nonbinding arbitration. If the parties 

fail to reach a settlement during 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 61181 

mediation, a party may, within 15 days 

of the expiration of the mediation 

period, request nonbinding arbitration. 

The party requesting nonbinding 

arbitration would be required to submit 

a written request for arbitration to the 

dispute resolution provider. The dispute 

resolution provider would determine 

how an arbitrator would be selected for 

each case. The parties may request an 

in-person hearing, to be held at the 

discretion of the arbitrator, after 

considering factors such as cost. If such 

a request is not made by all parties 

within 5 days of the dispute resolution 

provider’s receipt of the request for 

arbitration, the arbitrator may conduct 

either a record review or a telephonic 

hearing. If a party chooses not to 

participate in the arbitration, the 

process would continue without input 

from that party. The arbitrator would 

have the authority to issue orders to 

compel the completion of the record, 

conduct onsite inspections, dismiss 

frivolous allegations, and set hearing 

dates and deadlines. The arbitrator 

would be required to complete the 

arbitration within 21 days of receipt of 

the request for arbitration. After 

conducting a hearing, the arbitrator 

would provide HUD with a written 

nonbinding recommendation as to who 

the responsible party or parties are and 

what actions should be taken. The 

contents of the recommendation would 

only be made available to the Secretary. 

Comments are requested on whether 21 

days is sufficient time for the arbitration 

and whether additional time should be 

allowed for special circumstances. 

F. Secretarial Review 

The final stage of the process is 

Secretarial Review. After the arbitrator 

makes a recommendation, it would be 

forwarded to the Secretary. The 

Secretary would review the 

recommendation and the record. The 

Secretary would accept, modify, or 

reject the recommendation. Once the 

Secretary acts, he or she would issue an 

order that assigns responsibility. In the 

order for correction, the Secretary 

would include a date by which the 

correction of all defects must be 

completed, taking into consideration the 

seriousness of the defect. A party’s 

failure to comply with an order of the 

Secretary would be considered a 

violation of section 610(a)(5) of the Act 

(42 U.S.C. 5409(a)(5)). 

The responsible party or parties 

would be required to pay for or provide 

any repair of the home. The Secretary 

may apportion the costs for correction 

and repair if culpability rests with more 

than one party. The Department is 

interested in comments on the 

procedures outlined in Sections IV.C 

through IV.F of this preamble, 

particularly on whether the proposed 

time limits are reasonable. Comments 

are also welcome on whether or not 

there should be a time limit for Section 

IV.F and, if so, what a reasonable limit 

should be. 

G. Commercial Opt-Out Option When 

Homeowners Are Not Responsible 

Manufacturers, retailers, and 

installers (‘‘commercial parties’’) who 

have been unable to resolve a dispute 

involving a defect among themselves 

and who certify that the homeowner is 

not responsible for the defect would 

have the option to opt out of the HUD 

Manufactured Housing Dispute 

Resolution Program completely, in order 

to seek neutral evaluation outside of the 

structure of the HUD Manufactured 

Housing Program. To participate in the 

Commercial Opt-Out Option, any of the 

commercial parties must submit a 

written notification to the dispute 

resolution provider after it has reported 

an alleged defect or has been informed 

that an alleged defect has been reported 

to another party. Parties must opt out no 

more than 5 days after receiving notice 

from the Screening Neutral of a request 

for dispute resolution and before the 

HUD Manufactured Housing Dispute 

Resolution Program has commenced. 

Participants who elect to opt out must 

agree to engage a neutral expert. The 

selected neutral expert would evaluate 

the dispute and make an assignment of 

responsibility for correction and repair. 

The actual process followed would be 

designed and agreed to by the 

participants; there are no particular 

procedural requirements, such as 

witnesses or formal evidence. The 

participants may elect to memorialize 

the assignment of responsibility in 

writing. The participants must agree to 

allow the homeowner or the 

homeowner’s representative to be 

present at any meetings and to be 

informed of the outcome. The 

participants may inform the Department 

of the outcome. At any time after 30 

days of the Opt-Out Option notification, 

any party, including the homeowner, 

may invoke the HUD Manufactured 

Housing Dispute Resolution Program 

and proceed to mediation by following 

the established procedures. 

The Commercial Opt-Out Option was 

designed taking into account MHCC 

comments endorsing an alternate 

simplified process with minimal HUD 

involvement. HUD expects that the 

Commercial Opt-Out Option would 

allow for the resolution of disputes 

concerning defects in a cost-effective, 

expeditious, and fair manner in HUDadministered states. The Department is 

soliciting comments on the Commercial 

Opt-Out Option, and specifically on 

whether the option would ensure that 

homeowners’ problems are adequately 

addressed and remedied. Comments are 

also welcomed on the reasonableness of 

the 5-day time period in which parties 

must opt out after receiving notice of a 

request for dispute resolution. 

V. Informing Homeowners About 

Manufactured Housing Dispute 

Resolution 

One key component of the HUD 

Manufactured Housing Dispute 

Resolution Program will be notifying 

homeowners about the availability of 

dispute resolution in HUD-administered 

states through the HUD Manufactured 

Housing Dispute Resolution Program 

and in all other states through state 

dispute resolution programs. In its 

comments, the MHCC suggested that 

information about the HUD 

Manufactured Housing Dispute 

Resolution Program be made available 

in a standard notice that the retailer 

would provide to each homeowner at or 

before the signing of the sales contract. 

The homeowner would be required to 

sign a notice evidencing receipt. The 

Department is also considering notifying 

the homeowner by requiring a one-page 

informational document on the HUD 

Manufactured Housing Dispute 

Resolution Program to be included with 

the closing materials. The one-page 

informational document would mention 

that HUD will maintain a list of states 

that are operating state programs at 

http://www.hud.gov, to help 

homeowners determine whether their 

state has a program or if their state is a 

HUD-administered state and they 

should use the HUD Manufactured 

Housing Dispute Resolution Program. 

Additional comments on homeowner 

notification are welcomed. 

In addition, the Department proposes 

notifying the public about the HUD 

Manufactured Housing Dispute 

Resolution Program through the 

Consumer Manual that 42 U.S.C. 5416 

and 24 CFR 3282.207 currently require 

to be provided with each manufactured 

home. The manufacturer would be 

required to include in the Consumer 

Manual the specific language, or its 

equivalent, that is set out in the 

proposed revision of § 3282.207 in the 

proposed rule. The language would give 

detailed information about the dispute 

resolution program. The Department 

also welcomes comments on the specific 

proposal and language for notification 

in the Consumer Manual. 

61182 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 

VI. State Dispute Resolution Programs 

in Non-HUD-Administered States 

The HUD Manufactured Housing 

Dispute Resolution Program would not 

be implemented in states that request to 

be certified and that have dispute 

resolution programs that comply with 

the minimum requirements set out in 

these regulations. These states would 

administer their own dispute resolution 

programs. The responses to the ANPRM 

showed the diversity and innovation of 

state dispute resolution programs. 

Among HUD’s goals in the 

implementation of the HUD 

Manufactured Housing Dispute 

Resolution Program proposed in this 

rule is to encourage the growth and 

continued innovation of state programs. 

In furtherance of this goal, this rule 

would establish a self-certification 

process for each state. A state dispute 

resolution program would be required to 

meet criteria listed in the selfcertification form, but the rule 

establishing this form would not specify 

how the criteria are to be met. In this 

way, states will have more flexibility to 

design dispute resolution programs or 

modify existing ones according to their 

individual preferences and 

circumstances. Comments received from 

the MHCC strongly supported states 

creating and operating their own 

programs. 

Under the rule as proposed, each state 

wishing to implement its own dispute 

resolution program must certify 

compliance with the minimum 

requirements by submitting a completed 

Dispute Resolution Certification Form to 

HUD for review and acceptance. In part, 

the form would serve as a selfcertification very similar to the selfcertification process the MHCC and 

other commenters proposed in their 

responses to the ANPRM. The Dispute 

Resolution Certification Form 

developed by HUD and attached as an 

Appendix to this proposed rule directs 

respondents to answer questions 

specifically related to how their dispute 

resolution programs comply with the 

requirements stated in the Act and this 

regulation. The Certification Form 

would require identification of the state 

agency that administers the dispute 

resolution program, the director of that 

agency, and the person who directly 

supervises the administration of the 

program. A brief written description of 

the state’s dispute resolution program 

would be required, including 

information on how disputes are 

resolved regarding responsibility for 

correction and repair of defects in 

manufactured homes involving retailers, 

manufacturers, or installers and how the 

program provides for the timely 

resolution of disputes and the issuance 

of appropriate orders. HUD intends to 

put information about states that are 

certified, including each state’s contact 

information, on its Web site. 

The minimum requirements for selfcertification are set forth in Part II of the 

proposed Certification and include: (1) 

The timely resolution of disputes 

regarding responsibility for correction 

and repair of defects in manufactured 

homes involving manufacturers, 

retailers, or installers; (2) provisions for 

issuance of appropriate orders for 

correction and repairs of defects in the 

homes; (3) a coverage period for 

disputes involving defects that are 

reported within at least one year from 

the date beginning on the date of 

installation; (4) provisions for 

homeowners to initiate complaints for 

resolution and to have homeowner 

interests protected; (5) provisions for 

adequate funding and personnel; and (6) 

provisions for conflict of interest 

safeguards that ensure that a dispute 

resolver does not have a significant 

interest in the outcome of a particular 

dispute or a significant relationship to a 

person involved in a particular dispute. 

Any state that certifies that its program 

meets these six minimum requirements 

would be accepted and permitted to 

implement its own program. 

A state that meets the minimum 

requirements set forth under § 3288.205 

(e) and (f), and three of the four 

minimum requirements under 

§ 3288.205(a)–(d), may be conditionally 

accepted by the Secretary. A state that 

is conditionally accepted would be 

permitted to implement its own 

program for a period of not more than 

3 years absent extension of this period 

by HUD. Part III of the proposed 

Certification requires more detailed 

information about the state’s program. 

HUD anticipates that Part III, as well as 

the other parts of the Certification, 

would be used to assess whether future 

modification of the HUD Manufactured 

Housing Dispute Resolution Program 

will be necessary. 

In reviewing a state’s certification, 

HUD may contact the state to request 

additional clarification or information 

as necessary. States that are rejected 

would be notified and given 30 days to 

submit a revised Certification. States 

that fail to submit a revised Certification 

or are otherwise still rejected would 

have a right to a hearing on the rejection 

using the procedures set forth under 

subpart D of Part 3282. If a state has a 

dispute resolution program as part of its 

state plan, it would be reviewed as part 

of the state plan. Accepted states would 

be required to recertify every 3 years or 

when there is any significant change to 

the state program, whichever is the 

earlier. If the Secretary becomes aware 

at any time that a state no longer meets 

the minimum requirements set forth 

under § 3288.205, or failed to properly 

recertify, the acceptance of the 

Certification may be revoked after an 

opportunity for a hearing. HUD 

welcomes comments especially from the 

states on the certification requirements. 

HUD seeks comments from states that 

currently have dispute resolution 

programs on whether their programs 

include the homeowner. If such a state 

does not, the commenter is asked to 

identify any homeowner protections 

that are in place and to address the 

feasibility of adding the homeowner to 

its program. 

VII. Specific Issues for Comment 

In addition to commenting on the 

specific provisions included in this 

proposed rule, the public is invited to 

comment on the following questions, 

and any other related matters or 

suggestions: 

(1) What other methods should be 

used to notify and educate the 

homeowner about the HUD 

Manufactured Home Dispute Resolution 

Program and the availability of state 

programs in non-HUD-administered 

states? Should a temporary notice be 

required to be posted in each home? 

(2) What criteria should be used for 

conditional acceptance of state dispute 

resolution programs? 

(3) What should be the criteria for 

determining whether there is adequate 

staffing and resources? 

(4) What type of conflict-of-interest 

provision should states administering 

their own dispute resolution program be 

required to have? 

VIII. Conforming Amendments 

Since HUD is using the term 

‘‘manufactured home’’ in this proposed 

rule, HUD is taking this opportunity to 

correct the definition in 24 CFR 3280.2 

by adding the reference to self-propelled 

vehicles found in section 603(6) of the 

Act (42 U.S.C. 5402(6)). HUD is also 

clarifying the methodology for the 

calculation of square footage that is 

included in the current regulatory 

definition. This action will result in 

consistent usage of the term for all parts 

of the manufactured housing program. 

IX. Findings and Certifications 

Regulatory Planning and Review 

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866 (entitled 

‘‘Regulatory Planning and Review’’). 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 61183 

OMB determined that this rule is a 

‘‘significant regulatory action’’ as 

defined in section 3(f) of the Order 

(although not an economically 

significant regulatory action under the 

Order). The docket file is available for 

public inspection in the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 10276, Washington, DC 20410–

0500. Due to security measures at the 

HUD Headquarters building, please 

schedule an appointment to review the 

docket file by calling the Regulations 

Division at (202) 708–3055 (this is not 

a toll-free number). 

Paperwork Reduction Act 

The proposed information collection 

requirements contained in this rule have 

been submitted to the Office of 

Management and Budget (OMB) for 

review under the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501–3520). 

Under this Act, an agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless the collection 

displays a valid control number. 

The public reporting burden for this 

collection of information is estimated to 

include the time for reviewing the 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information. 

The following table provides 

information on the estimated public 

reporting burden: 

Information collection Number of 

respondents 

Responses 

per 

respondent 

Total annual 

responses 

Hours per 

response Total hours 

State Certification for Manufactured Housing Dispute Resolution ............................................................................... 17 1 17 1 17 

Federal manufactured housing dispute resolution 

information* ...................................................................... 3,600 1 3,600 1 3,600 

* Almost all of the details of the requests for federal dispute resolution will follow initial complaints already sent to the manufacturer or to the 

federal manufactured housing program. 

In accordance with 5 CFR 

1320.8(d)(1), HUD is soliciting 

comments from members of the public 

and affected agencies concerning the 

proposed collection of information to: 

(1) Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

(2) Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; 

(3) Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

(4) Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated collection 

techniques or other forms of information 

technology, e.g., permitting electronic 

submission of responses. 

Interested persons are invited to 

submit comments regarding the 

information collection requirements in 

this proposal. Under the provisions of 5 

CFR 1320, OMB is required to make a 

decision concerning this collection of 

information between 30 and 60 days 

after today’s publication date. Therefore, 

any comment on the information 

collection requirements is best assured 

of having its full effect if OMB receives 

the comment within 30 days of today’s 

publication. This time frame, however, 

does not affect the deadline for 

comments to the agency on the 

proposed rule. Comments must refer to 

the proposal by name and docket 

number (FR–4813–P–02) and must be 

sent to: HUD Desk Officer, Office of 

Management and Budget, New 

Executive Office Building, Washington, 

DC 20503 and Kathleen O. McDermott, 

Reports Liaison Officer, Office of the 

Assistant Secretary for Housing-Federal 

Housing Commissioner, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 9116, 

Washington, DC 20410–8000. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531–

1538) establishes requirements for 

federal agencies to assess the effects of 

their regulatory actions on state, local, 

and tribal governments and the private 

sector. This rule, which implements a 

statutory mandate to establish a program 

for the resolution of a narrow category 

of disputes, will not impose any federal 

mandates on any state, local, or tribal 

government or the private sector within 

the meaning of the Unfunded Mandates 

Reform Act of 1995. 

Environmental Review 

This proposed rule does not direct, 

provide for assistance or loan and 

mortgage insurance for, or otherwise 

govern or regulate, real property 

acquisition, disposition, leasing, 

rehabilitation, alteration, demolition, or 

new construction, or establish, revise or 

provide for standards for construction or 

construction materials, manufactured 

housing, or occupancy. Accordingly, 

under 24 CFR 50.19(c)(1), this proposed 

rule is categorically excluded from 

environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321). 

Impact on Small Entities 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires that a 

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. Such an 

analysis need not be undertaken if the 

agency has certified that the regulation 

will not have a significant economic 

impact on a substantial number of small 

entities. 

HUD has conducted a labor and travel 

cost impact analysis for this rule. The 

cost analysis determines the cost 

difference between a typical dispute 

resolution process (the process) 

involving manufactured housing and 

the civil litigation costs between one or 

more parties involved in a 

manufactured housing dispute. A 

typical dispute resolution method is a 

two-step process: Mediation and then 

for a small percent of unsuccessful 

Mediation cases, arbitration. 

The potential cost impact of the 

mediation step for manufacturers would 

be approximately $1,550 per dispute 

and $237 for retailers and $177 for 

installers. HUD anticipates that it may 

be administering the dispute resolution 

process in 26 states where 

approximately 37,800 homes are 

expected to be installed annually. 

Currently 45 manufacturing corporate 

entities ship into those states, while 

1,719 retailers sell homes and 

approximately 5,000 individuals or 

61184 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 

businesses install manufactured homes 

in those states. 

Based on the preceding data, HUD 

anticipates taking action on 1,890 

complaints under the federal 

manufactured housing dispute 

resolution process in the year 2006. 

Presuming that the average cost of this 

action ($1,964) will be incorporated into 

the home price or related service fees of 

every installed home in the 26 states 

(37,800), the cost impact to each 

installed home would be $98. 

If all 1,890 cases were settled through 

litigation rather than dispute resolution, 

the cost of litigating 1,890 cases would 

total $18.9 million. Averaged across 

37,800 homes, the average cost of 

litigation incorporated into each home 

price would be $500 per home, 

compared to the average cost of dispute 

resolution of $98 per home. This would 

provide a savings of $402 or 75 percent 

per home. 

The small increase in total cost 

associated with this proposed rule 

would not impose a significant burden 

for a small business. The rule would 

regulate establishments primarily 

engaged in the production of 

manufactured homes (NAICS 32991) 

and the sale of manufactured homes 

(NAICS 453930). In addition, 

manufactured home set-up and tiedown establishments (installers) would 

be included within the definition of all 

other special trade contractors (NAICS 

23599). Of the 222 firms included under 

the NAICS 32991 definition, 198 are 

small manufacturers, which fall below 

the small business threshold of 500 

employees. There are 10,691 retailers 

included under NAICS 453930; all of 

the firms fall below the $11 million 

annual income rate. Of the 31,320 firms 

included under NAICS 23599 

definitions, only 53 firms exceed the 

small business threshold of 500 

employees and none of these is 

primarily a manufactured home set-up 

and tie-down establishment. The rule, 

therefore, would affect a substantial 

number of small entities. However, the 

home manufacturers, retailers, and 

installers would only be subject to an 

associated labor cost and travel expense 

necessary to attend the mediation 

process and labor costs to participate in 

the expected record review and possible 

telephonic or face-to-face meeting for 

arbitration. Moreover, because the great 

majority of manufacturers, retailers, and 

installers are considered small entities, 

there would not be any disproportional 

impact on them. Therefore, although 

this rule would affect a substantial 

number of small entities, it would not 

have a significant economic impact on 

them. In addition, the speedier and 

more certain resolution of disputes 

should help the affected businesses. 

The Secretary, in accordance with the 

Regulatory Flexibility Act (5 U.S.C. 

605(b)), has reviewed and approved this 

proposed rule and, in so doing, certifies 

that the rule would not have a 

significant economic impact on a 

substantial number of small entities. 

The proposed rule does not provide an 

exemption for small entities. This 

proposed rule does not establish any 

responsibilities for all parties, but rather 

establishes a process whereby all may 

come to an amicable solution. 

Notwithstanding HUD’s 

determination that this rule would not 

have a significant economic 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. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from promulgating a regulation 

that has federalism implications and 

either imposes substantial direct 

compliance costs on state and local 

governments and is not required by 

statute, or preempts state law, unless the 

relevant requirements of section 6 of the 

Executive Order are met. This rule does 

not have federalism implications and 

does not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the Executive 

Order. State and local governments are 

not required to establish dispute 

resolution programs, but the rule 

provides a mechanism to recognize state 

programs that meet the statutory 

elements of a dispute resolution 

program to operate in lieu of the federal 

manufactured housing dispute 

resolution program. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance number for Manufactured 

Housing is 14.171. 

List of Subjects 

24 CFR Part 3280 

Housing standards, Incorporation by 

reference, Manufactured homes. 

24 CFR Part 3282 

Administrative practice and 

procedure, Consumer protection, 

Intergovernmental relations, 

Investigations, Manufactured homes, 

Reporting and recordkeeping 

requirements, Warranties. 

24 CFR Part 3288 

Administrative practice and 

procedure, Consumer protection, 

Intergovernmental relations, 

Manufactured homes, Reporting and 

recordkeeping requirements. 

Accordingly, for the reasons stated in 

the preamble, HUD proposes to amend 

parts 3280 and 3282 and add a new part 

3288 in chapter XX of title 24 of the 

Code of Federal Regulations as follows: 

PART 3280—MANUFACTURED HOME 

CONSTRUCTION AND SAFETY 

STANDARDS 

1. The authority citation for part 3280 

continues to read as follows: 

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

5424. 

2. In § 3280.2, the definition of 

‘‘manufactured home’’ is revised to read 

as follows: 

§ 3280.2 Definitions. 

* * * * * 

Manufactured home means a 

structure, transportable in one or more 

sections, which in the traveling mode is 

8 body feet or more in width or 40 body 

feet or more in length or which when 

erected on site is 320 or more square 

feet, and which is built on a permanent 

chassis and designed to be used as a 

dwelling with or without a permanent 

foundation when connected to the 

required utilities, and includes the 

plumbing, heating, air-conditioning, and 

electrical systems contained in the 

structure. This term includes all 

structures that meet the above 

requirements except the size 

requirements and with respect to which 

the manufacturer voluntarily files a 

certification pursuant to § 3282.13 of 

this chapter and complies with the 

construction and safety standards set 

forth in this part 3280. The term does 

not include any self-propelled 

recreational vehicle. Calculations used 

to determine the number of square feet 

in a structure will include the total of 

square feet for each transportable 

section comprising the completed 

structure and will be based on the 

structure’s exterior dimensions 

measured at the largest horizontal 

projections when erected on site. These 

dimensions will include all expandable 

rooms, cabinets, and other projections 

containing interior space, but do not 

include bay windows. Nothing in this 

definition should be interpreted to mean 

that a manufactured home necessarily 

meets the requirements of HUD’s 

Minimum Property Standards (HUD 

Handbook 4900.1) or that it is 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 61185 

automatically eligible for financing 

under 12 U.S.C. 1709(b). 

* * * * * 

PART 3282—MANUFACTURED HOME 

PROCEDURAL AND ENFORCEMENT 

REGULATIONS 

3. The authority citation for part 3282 

continues to read as follows: 

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

4. In § 3282.207, redesignate 

paragraph (e) as paragraph (f), and add 

a new paragraph (e) to read as follows: 

§ 3282.207 Manufactured home consumer 

manual requirements. 

* * * * * 

(e) The manufacturer must include 

the following language or its equivalent 

in the consumer manual: 

Many states have a dispute resolution 

program that homeowners may use to resolve 

problems with manufacturers, retailers, or 

installers concerning defects in their 

manufactured homes. In states where there is 

not a dispute resolution program that meets 

the federal requirements, the HUD 

Manufactured Housing Dispute Resolution 

Program will operate. These are ‘‘HUDadministered states.’’ You may contact HUD 

at (202) 708–6423 or (800) 927–2891, or visit 

the HUD Web site at http://www.hud.gov to 

determine whether you have a state program 

or should use the HUD Manufactured 

Housing Dispute Resolution Program. 

Contact information for state programs is also 

available on the HUD website. If you have a 

state program, please contact the state for 

information about the program, how it 

operates, and what steps to take to request 

dispute resolution. When there is no state 

dispute resolution program, homeowners 

may use the HUD Manufactured Housing 

Dispute Resolution Program to resolve 

disputes among manufacturers, retailers, or 

installers for the correction or repair of 

defects in their manufactured home that were 

reported during the one-year period starting 

at the date of installation. Even after the oneyear period, manufacturers have continuing 

responsibility to review certain problems that 

affect the intended use of the manufactured 

home or its parts, but correction of those 

problems may no longer be required under 

federal law. The HUD Manufactured Housing 

Dispute Resolution Program is not for 

cosmetic or minor problems in the home. It 

is for problems that make the home or 

components of the home not fit for the 

ordinary use for which they were intended. 

The steps and information outlined below 

apply only to the HUD Manufactured 

Housing Dispute Resolution Program that 

operates in HUD-administered states. Under 

the HUD Manufactured Housing Dispute 

Resolution Program, homeowners must first 

report defects to the manufacturer, retailer, 

installer, or HUD. Homeowners are 

encouraged to report defects in writing, 

including but not limited to e-mail, written 

letter, certified mail, or fax and may also 

make a report by telephone. To demonstrate 

that the report was made within one year 

after the date of installation, homeowners 

should report defects in a manner that will 

create a dated record of the report, for 

example, by certified mail, fax or e-mail. 

When making a report by telephone, 

homeowners are encouraged to make a note 

of the phone call, including names of 

conversants, date, and time. No particular 

format is required to submit a report of an 

alleged defect, but any such report should at 

a minimum include a description of the 

alleged defect or problem. 

Homeowners are encouraged to send 

reports of an alleged defect to the 

manufacturer, retailer, or installer of the 

manufactured home. Reports of alleged 

defects may also be sent to HUD at: HUD, 

Office of Regulatory Affairs and 

Manufactured Housing, Attn: Dispute 

Resolution, 451 Seventh Street, SW., 

Washington, DC 20410–8000; faxed to (202) 

708–4213; or e-mailed to mhs@hud.gov. 

If, after taking the steps outlined above, the 

homeowner does not receive a satisfactory 

response from the manufacturer, retailer, or 

installer, the homeowner may file a dispute 

resolution request with the dispute 

resolution provider in writing, or by making 

a request by phone. No particular format is 

required to make a request for dispute 

resolution, but the request must include the 

following information: 

(1) The name, address, and contact 

information of the homeowner; 

(2) The name and contact information of 

the manufacturer, retailer, and installer of the 

manufactured home; 

(3) The date the report of alleged defect or 

problem notification was made; 

(4) Identification of the entities or persons 

to whom the report of the alleged defect was 

sent, and the method that was used to make 

the report; 

(5) The date of installation of the 

manufactured home affected by the defect; 

and 

(6) A description of the alleged defect. 

Information about the dispute resolution 

provider and how to make a request for 

dispute resolution will be available at 

http://www.hud.gov or by contacting the 

Office of Manufactured Housing Programs at 

(202) 708–6423 or (800) 927–2891. 

A screening agent from a dispute 

resolution provider will review the request 

and, if appropriate, forward the request to a 

mediator. The mediator will mediate the 

dispute and attempt to facilitate a settlement. 

If the parties are unable to reach a settlement, 

any party may request nonbinding 

arbitration. Should any party refuse to 

participate, the arbitration shall proceed 

without that party’s input. Once the 

arbitrator makes a determination, the 

arbitrator will forward it to the Secretary of 

HUD, who may then adopt, modify, or reject 

the recommendation. The responsible party 

or parties will be required to pay for or 

provide any repair of the home. 

In circumstances where manufacturers, 

retailers, and/or installers are involved and 

agree that one of them and not the 

homeowner is responsible for the alleged 

defect, these commercial entities will have 

the opportunity to resolve the dispute 

outside of the HUD Manufactured Housing 

Dispute Resolution Program by exercising the 

Commercial Opt-Out Option. Homeowners 

will maintain the right to be present at any 

meetings and to be informed of the outcome 

when the Commercial Opt-Out Option is 

exercised. At any time after 30 days of the 

Opt-Out Option notification, any participant 

or the homeowner may invoke the HUD 

Manufactured Housing Dispute Resolution 

Program and proceed to mediation. 

* * * * * 

5. In chapter XX, add a new part 3288, 

to read as follows: 

PART 3288—MANUFACTURED HOME 

DISPUTE RESOLUTION PROGRAM 

Subpart A—General 

Sec. 

3288.1 Purpose and scope. 

3288.3 Definitions. 

3288.5 Effective date. 

Subpart B—HUD Manufactured Housing 

Dispute Resolution Program in HUDAdministered States 

3288.10 Applicability. 

3288.15 Eligibility for dispute resolution. 

3288.20 Reporting a defect. 

3288.25 Initiation of dispute resolution. 

3288.30 Screening of dispute resolution 

request. 

3288.35 Mediation. 

3288.40 Nonbinding arbitration. 

3288.45 Secretarial review and order. 

Subpart C—Commercial Opt-Out Option in 

HUD-Administered States 

3288.100 Scope and applicability. 

3288.105 Time when Commercial Opt-Out 

Option available. 

3288.110 Opt-out agreements. 

Subpart D—State Dispute Resolution 

Programs in Non-HUD-Administered States 

3288.200 Applicability. 

3288.205 Minimum requirements. 

3288.210 Acceptance and recertification 

process. 

3288.215 Effect on other manufactured 

housing program requirements. 

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

5424. 

Subpart A—General 

§ 3288.1 Purpose and scope. 

The National Manufactured Housing 

Construction and Safety Standards Act 

of 1974 (the Act) (42 U.S.C. 5401–5426), 

is intended, in part, to protect the 

quality, safety, durability, and 

affordability of manufactured homes. 

Section 623(c)(12) of the Act (42 U.S.C. 

5422(c)(12)) requires the 

implementation of ‘‘a dispute resolution 

program for the timely resolution of 

disputes between manufacturers, 

retailers, and installers of manufactured 

homes regarding responsibility, and for 

the issuance of appropriate orders, for 

the correction or repair of defects in 

manufactured homes that are reported 

61186 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 

during the one-year period beginning on 

the date of installation.’’ Subpart A of 

this part establishes general provisions 

applicable to HUD’s implementation of 

a dispute resolution program as required 

by the Act. Subpart B of this part 

establishes the HUD Manufactured 

Housing Dispute Resolution Program 

that HUD will administer in any state 

that does not establish a program that 

complies with the Act. Subpart C of this 

part provides an option for parties that 

are not homeowners to resolve disputes 

outside of the HUD Manufactured 

Housing Dispute Resolution Program 

under subpart B. Subpart D of this part 

establishes the minimum requirements 

that must be met by a state wishing to 

implement its own dispute resolution 

program that complies with the Act, and 

the procedure for determining whether 

the requirements for complying have 

been met. The purpose of this part is to 

provide a dispute resolution process for 

the timely resolution of disputes among 

manufacturers, retailers, and installers 

regarding the responsibility for 

correction or repair of defects reported 

by the homeowner or others and 

reported in the 1-year period after 

installation in manufactured homes. In 

carrying out this purpose, it is assumed 

that if a manufactured home contains a 

defect that was not caused by the 

homeowner, the manufacturer, retailer, 

or installer is responsible for the defect 

and the dispute resolution process is an 

appropriate means to resolve issues of 

responsibility for correction and repair 

of the home. 

§ 3288.3 Definitions. 

The following definitions apply in 

this part: 

Appropriate order means an order 

issued by the Secretary or an order that 

is enforceable under state law. 

Date of installation means the date all 

utilities are connected and the 

manufactured home is ready for 

occupancy as established, if applicable, 

by a certificate of occupancy, except as 

follows: if the manufactured home has 

not been sold to the first person 

purchasing the home in good faith for 

purposes other than resale by the date 

the home is ready for occupancy, the 

date of installation is the date of the 

purchase agreement or sales contract for 

the manufactured home. 

Day means a calendar day. 

Defect includes any defect in the 

performance, construction, components, 

or material of a manufactured home that 

renders the home or any part of the 

home not fit for the ordinary use for 

which it was intended, including but 

not limited to a defect in the 

construction, safety, or installation of 

the home. 

Dispute resolution provider means a 

person or entity providing dispute 

resolution services for HUD. 

Homeowner means the first person to 

purchase or lease the home in good faith 

for purposes other than resale. 

Manufactured home has the same 

meaning as ‘‘manufactured home’’ as 

defined at 24 CFR 3280.2. 

Party or parties means, individually 

or collectively, the manufacturer, 

retailer, or installer of a manufactured 

home in which a defect has been 

reported. 

Timely reporting means the reporting 

of an alleged defect within one year 

after the date of installation of a 

manufactured home. 

Timely resolution means the 

resolution of disputes among 

manufacturers, retailers, and installers 

within 120 days of the time a request for 

dispute resolution is made, except that 

if the defect presents an unreasonable 

risk of injury, death, or significant loss 

or damage to valuable personal 

property, the resolution must be within 

60 days of the time a request for dispute 

resolution is made. 

§ 3288.5 Effective date. 

The requirements of this part are 

applicable to manufactured homes 

installed after December 27, 2005, or 

after the initial effective date of this 

part, whichever is later. 

Subpart B—HUD Manufactured 

Housing Dispute Resolution Program 

in HUD-Administered States 

§ 3288.10 Applicability. 

The requirements of the HUD 

Manufactured Housing Dispute 

Resolution Program established in this 

subpart B apply in each state that does 

not establish a state dispute resolution 

program that complies with the Act and 

has been accepted by HUD as provided 

in subpart D of this part. 

§ 3288.15 Eligibility for dispute resolution. 

(a) Eligible parties. Manufacturers, 

retailers, and installers of manufactured 

homes are eligible to initiate action 

under and participate in the HUD 

Manufactured Housing Dispute 

Resolution Program. Homeowners may 

also initiate and participate in the HUD 

Manufactured Housing Dispute 

Resolution Program. 

(b) Eligible disputes. Only disputes 

concerning alleged defects that have 

been reported to the manufacturer, 

retailer, installer, or HUD within one 

year after the date of installation of the 

manufactured home are eligible for the 

HUD Manufactured Housing Dispute 

Resolution Program. The matter eligible 

for dispute resolution is the defect 

alleged in a timely report and any 

related issues. 

§ 3288.20 Reporting a defect. 

(a) Form of report. It is recommended 

that defects be reported in writing, 

including but not limited to e-mail, 

written letter, certified mail, or fax. 

Defects may also be reported by 

telephone. 

(b) Content of report. No particular 

form or format is required to report a 

defect, but any such report should at a 

minimum include a description of the 

alleged defect or problem. 

(c) Record of report. (1) Report made 

to parties. (i) To evidence timeliness. To 

avoid issues of lack of timely reporting, 

the report of a defect that is made to the 

manufacturer, retailer, or installer of the 

manufactured home should be done in 

a manner that will create a dated record 

of the report to demonstrate that the 

report was made within one year after 

the date of installation, for example, by 

certified mail, fax, or e-mail. For reports 

made by telephone, making a 

contemporaneous note of the phone call 

is recommended. 

(ii) Obligation to retain. For purposes 

of this part, each report of a defect, 

including logs of telephonic complaints 

received by a manufacturer, retailer, 

and/or installer, must be maintained for 

three years from the date of receipt, if 

the report is made within one year after 

the date of installation. 

(2) Reports made to HUD. (i) Reports 

of alleged defects that arise in the 

manufactured home in the first year 

after its installation can be sent to HUD: 

(A) In writing at: HUD, Office of 

Regulatory Affairs and Manufactured 

Housing, Attn: Dispute Resolution, 451 

Seventh Street, SW., Washington, DC 

20410–8000; 

(B) By telephone at: (202) 708–6423 or 

(800) 927–2891; 

(C) By fax at: (202) 708–4213; and 

(D) By e-mail at mhs@hud.gov. 

(d) Effect of report. The reporting of 

a defect does not initiate the dispute 

resolution process, but only establishes 

whether the requirement of timely 

reporting in accordance with 

§ 3288.15(b) has been met. 

§ 3288.25 Initiation of dispute resolution. 

(a) Preliminary effort. HUD strongly 

encourages the party reporting the 

defect to seek to resolve the dispute 

directly with the party or parties that 

they believe are responsible before 

initiating the federal dispute resolution 

process. 

(b) Request for dispute resolution. 

Any of the parties may initiate the HUD 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 61187 

Manufactured Housing Dispute 

Resolution Program process at any time 

after a defect has been reported by 

requesting dispute resolution as follows: 

(1) By mailing, e-mailing, or otherwise 

delivering a written request for dispute 

resolution to the dispute resolution 

provider at the address or e-mail 

address provided either at http:// 

www.hud.gov or HUD’s Office of 

Regulatory Affairs and Manufactured 

Housing at (202) 708–6423 or (800) 927–

2891; 

(2) By faxing a request for dispute 

resolution to the fax number provided 

either at http://www.hud.gov or HUD’s 

Office of Regulatory Affairs and 

Manufactured Housing at (202) 708–

6423 or (800) 927–2891; or 

(3) By phoning in a request for 

dispute resolution at the phone number 

provided either at http://www.hud.gov 

or HUD’s Office of Regulatory Affairs 

and Manufactured Housing at (202) 

708–6423 or (800) 927–2891. 

(c) Required information. The dispute 

resolution provider will request at least 

the following information to initiate the 

dispute resolution process: 

(1) The name, address, and contact 

information of the homeowner; 

(2) The name and contact information 

of the manufacturer, retailer, and 

installer of the manufactured home; 

(3) The date the report of the alleged 

defect was made; 

(4) The name and contact information 

of the recipient or recipients of the 

report of the alleged defect; 

(5) The date of installation of the 

manufactured home affected by the 

defect; and 

(6) A description of the alleged defect. 

§ 3288.30 Screening of dispute resolution 

request. 

(a) Review for sufficiency. Once the 

request for dispute resolution has been 

received by the dispute resolution 

provider, a Screening Neutral will 

review the sufficiency of the 

information provided in the request for 

dispute resolution and determine if the 

dispute resolution process should 

proceed. If a defect is properly alleged, 

the request will be forwarded for 

mediation. 

(b) Insufficient information. If a 

request for dispute resolution is lacking 

any information required to determine if 

the dispute resolution process should 

proceed, the Screening Neutral will 

contact the requester in order to 

supplement the initial request. 

§ 3288.35 Mediation. 

(a) Mediator. The dispute resolution 

provider will provide for the selection 

of a mediator. The selected mediator 

will not be the person who screened the 

dispute resolution request. The selected 

mediator will then mediate the dispute 

and attempt to facilitate a settlement. 

(b) Time. (1) For reaching settlement. 

Except as provided in paragraph (b)(2) 

of this section, the parties are allowed 

30 days from the commencement of the 

mediation to reach a mediated 

settlement. 

(2) Defects presenting an 

unreasonable risk of injury, death, or 

significant loss or damage to valuable 

personal property. For mediations 

involving defects that appear to present 

an unreasonable risk of injury, death, or 

significant loss or damage to valuable 

personal property, the parties have a 

maximum of 10 days to reach a 

mediated settlement. 

(3) For corrective repairs. Unless a 

longer period is agreed to in writing by 

the parties to the mediated settlement 

and the homeowner, corrective repairs 

must be completed no later than 30 days 

after the settlement agreement. 

(c) Written settlement agreement. 

Upon reaching an agreement, the parties 

will sign a written settlement 

agreement. The dispute resolution 

provider will forward copies of the 

agreements with the original signatures 

of the parties to the parties and to HUD. 

(d) Confidentiality. Except for the 

report of an alleged defect, any request 

for dispute resolution, any agreement to 

mediate, and any written settlement 

agreement, all other documents and 

communications used in the mediation 

will be confidential, in accordance with 

the Administrative Dispute Resolution 

Act of 1996 (5 U.S.C. 571 et seq.). 

§ 3288.40 Nonbinding arbitration. 

(a) When initiated. If the parties fail 

to reach a settlement through mediation 

under § 3288.35, any party may, within 

15 days of the expiration of any time 

permitted under § 3288.35(b), initiate 

nonbinding arbitration. 

(b) Written request. (1) Submission to 

HUD. A written request for arbitration 

must be submitted to the dispute 

resolution provider. Information about 

the dispute resolution provider and how 

to make a request for dispute resolution 

will be available at http://www.hud.gov 

or by contacting HUD’s Office of 

Manufactured Housing Programs at 

(202) 708–6423 or (800) 927–2891. 

(2) Contents of request. The written 

request for arbitration must include: 

(i) The names and addresses of all 

relevant parties, including the party 

making the request; 

(ii) A brief description of the alleged 

defect or a copy of the report of the 

defect; and 

(iii) A copy of the request for dispute 

resolution. 

(c) Appointment and authority of 

arbitrator. Upon receipt of the request, 

the dispute resolution provider will 

provide for the selection of an arbitrator. 

The arbitrator will have the authority to: 

(1) Set hearing dates and deadlines; 

(2) Conduct onsite inspections; 

(3) Issue orders to compel the 

completion of the record; 

(4) Dismiss frivolous allegations; 

(5) Make a disposition 

recommendation to the Secretary; and 

(6) Recommend apportionment of the 

responsibility of paying for or providing 

any repair of the home when culpability 

is assessed to more than one party. 

(d) Proceedings. (1) The arbitrator 

may conduct either a record review or 

a telephonic hearing if the parties do not 

request an in-person hearing under 

paragraph (d)(2) of this section within 5 

days of the dispute resolution provider’s 

receipt of the request for arbitration, or 

if the arbitrator rejects the request for an 

in-person hearing. 

(2) If any party wants to request an inperson hearing, in which the parties or 

their representatives personally appear 

before the arbitrator, the arbitrator will 

consider such a request if it is made by 

all of the parties that are participating in 

the arbitration. Such an in-person 

hearing will be held at the discretion of 

the arbitrator, after considering 

appropriate factors, such as cost. 

(e) Effect on nonparticipating parties. 

If a party chooses not to participate in 

the arbitration, the process will 

continue without further input from that 

party. In such a case, the arbitrator may 

rely on the record developed through 

the arbitration to find a nonparticipating 

party responsible for correcting a defect. 

(f) Completion of arbitration. Within 

21 days of the dispute resolution 

provider’s receipt of the request for 

arbitration, the arbitrator will complete 

the arbitration process and provide HUD 

with a written, nonbinding 

recommendation as to which party or 

parties are responsible for the defect, 

and what corrective actions should be 

taken. 

§ 3288.45 Secretarial review and order. 

(a) Appropriate order. The Secretary 

will review the arbitrator’s 

recommendation provided in 

accordance with § 3288.40(f) and the 

record, if any, of the arbitration, and 

will issue an order accepting, 

modifying, or rejecting the 

recommendation. The Secretary will 

forward a copy of the order to the 

arbitrator and to each of the parties, 

whether or not a party participated in 

the arbitration. 

61188 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 

(b) Contents of order. If the Secretary 

finds that a defect exists, the order will 

include the following: 

(1) Assignment of responsibility for 

the correction and repair of all defects 

and associated costs; and 

(2) A date by which the correction of 

all defects must be completed, taking 

into consideration the seriousness of the 

defect. 

(c) Failure to comply. A party’s failure 

to comply with an order issued 

pursuant to this part will be considered 

a violation of section 610(a)(5) of the 

Act (42 U.S.C. 5409(a)(5)). 

Subpart C—Commercial Opt-Out 

Option in HUD-Administered States 

§ 3288.100 Scope and applicability. 

The requirements of this subpart C 

may be followed in lieu of the 

requirements of subpart B of this part to 

resolve disputes among manufacturers, 

retailers, and installers of manufactured 

homes in any state where subpart B of 

this part would otherwise apply. In 

limited circumstances, this subpart 

permits manufacturers, retailers, and 

installers of manufactured homes to use 

expert neutrals of their choosing to 

resolve disputes concerning defects in 

manufactured homes. The Commercial 

Opt-Out Option may be initiated after a 

defect has been reported, but no more 

than 5 days after notification from the 

Screening Neutral of a request for 

dispute resolution and before the HUD 

Manufactured Housing Dispute 

Resolution Program has commenced. 

Once the Opt-Out Option is initiated, 

none of the opt-out participants or the 

homeowner can invoke the HUD 

Manufactured Housing Dispute 

Resolution Program for 30 days. 

§ 3288.105 Time when Commercial OptOut Option available. 

(a) The Commercial Opt-Out Option 

may be initiated after a defect has been 

reported, but no more than 5 days after 

notification from the Screening Neutral 

of a request for dispute resolution and 

before the HUD Manufactured Housing 

Dispute Resolution Program has 

commenced, by a written notification to 

HUD’s dispute resolution provider. The 

notification may be made to the dispute 

resolution provider by mail, fax, e-mail, 

or other delivery at the address 

provided at http://www.hud.gov. 

(b) No particular form or format is 

required to provide notification for the 

Commercial Opt-Out Option, but the 

party or parties submitting the 

notification must include a statement 

from the parties stating that the 

homeowner is not responsible for the 

alleged defect and make reasonable 

efforts to include the following 

information: 

(1) The name, address, and contact 

information of the homeowner; 

(2) The name and contact information 

of the manufacturer, retailer, and 

installer of the manufactured home; 

(3) The date the report of the alleged 

defect was made; 

(4) The name and contact information 

of the recipient or recipients of the 

report of the alleged defect; 

(5) The date of installation of the 

manufactured home affected by the 

defect; and 

(6) A description of the alleged defect. 

§ 3288.110 Opt-out agreements. 

(a) Required agreement. To use the 

Commercial Opt-Out Option, as 

appropriate, the manufacturer, retailer, 

and installer of the manufactured home 

at issue must agree: 

(1) That there is a defect in the 

manufactured home; 

(2) That the manufacturer, retailer, or 

installer is responsible for the defect; 

(3) That the homeowner is not 

responsible for the defect; 

(4) To engage a neutral expert to 

evaluate the dispute and make an 

assignment of responsibility for 

correction and repair; and 

(5) To notify the homeowner of, and 

allow the homeowner to be present at, 

any meetings, and to inform the 

homeowner of the outcome. 

(b) Additional element of agreement. 

In addition, the parties should agree to 

act upon the neutral expert’s assignment 

of responsibility for correction and 

repair. 

Subpart D—State Dispute Resolution 

Programs in Non-HUD Administered 

States 

§ 3288.200 Applicability. 

This subpart D establishes the 

minimum requirements that must be 

met by a state to implement its own 

dispute resolution program and 

therefore not be covered by the HUD 

Manufactured Housing Dispute 

Resolution Program established in 

accordance with subpart B. The subpart 

also establishes the procedure for 

determining whether the state dispute 

resolution program meets the 

requirements of the Act for operating in 

lieu of the federal dispute resolution 

program. 

§ 3288.205 Minimum requirements. 

The HUD Manufactured Housing 

Dispute Resolution Program will not be 

implemented in any state that complies 

with the procedures of this subpart D 

and that has a dispute resolution 

program that provides for the following 

minimum requirements: 

(a) The timely resolution of disputes 

regarding responsibility for correction 

and repair of defects in manufactured 

homes involving manufacturers, 

retailers, or installers; 

(b) The issuance of appropriate orders 

for correction and repairs of defects in 

the homes; 

(c) A coverage period for disputes that 

includes at least defects that are 

reported within one year from the date 

of installation; 

(d) Provisions for homeowners to 

initiate complaints for resolution and to 

have homeowner interests protected; 

(e) Provisions for adequate funding 

and personnel; and 

(f) Provisions for conflict of interest 

safeguards which ensure that a dispute 

resolver does not have a significant 

interest in the outcome of a particular 

dispute or a significant relationship to a 

person involved in a particular dispute. 

§ 3288.210 Acceptance and recertification 

process. 

(a) Submission of certification. A State 

seeking certification must submit to 

HUD for review and acceptance a 

completed Dispute Resolution 

Certification Form as provided by HUD. 

The certification may be submitted as a 

part of, or independent of, a State plan 

under § 3282.302 of this chapter. 

(b) HUD review and action. (1) HUD 

will review the Dispute Resolution 

Certification Form submitted by a State 

and may contact the State to request 

additional clarification or information 

as necessary. Upon completing its 

review, HUD will provide the State with 

notice of acceptance, conditional 

acceptance, or rejection of its dispute 

resolution program. 

(2) A notice of acceptance will 

include the date of acceptance. 

(3) If HUD rejects a State’s dispute 

resolution program, HUD will provide 

an explanation of what is necessary to 

obtain full acceptance. A revised 

Dispute Resolution Certification Form 

may be submitted within 30 days of 

receipt of such notification. If the 

revised Dispute Resolution Certification 

Form is inadequate or if the State fails 

to resubmit within the 30-day period or 

otherwise indicates that it does not 

intend to change its Dispute Resolution 

Certification Form, HUD will notify the 

State that the dispute resolution 

program is not accepted and that it has 

a right to a hearing on the rejection 

using the procedures set forth under 

subpart D of part 3282 of this chapter. 

(c) Conditional acceptance. A State 

meeting the minimum requirements set 

forth under § 3288.205(e) and (f), and 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Proposed Rules 61189 

three of the four minimum requirements 

under § 3288.205(a) through (d) may be 

conditionally accepted by the Secretary. 

If HUD conditionally accepts a State’s 

dispute resolution program, HUD will 

provide an explanation of what is 

necessary to obtain full acceptance. A 

revised Dispute Resolution Certification 

Form may be submitted within 30 days 

of receipt of such notification. Any State 

conditionally accepted will be 

permitted to implement its own dispute 

resolution program for a period of not 

more than 3 years absent extension of 

this period by HUD. 

(d) Revocation. If the Secretary 

becomes aware at any time that a State 

no longer meets the minimum 

requirements set forth under § 3288.205, 

the acceptance of the Certification may 

be revoked after an opportunity for a 

hearing. 

(e) Recertification. To maintain its 

accepted status, a State must submit a 

current Dispute Resolution Certification 

Form to HUD for review and 

acceptance: 

(1) Every three years within 90 days 

of the day and month of its most recent 

date of acceptance; or 

(2) Whenever there is a significant 

change to the program, whichever is the 

earlier. A State that is conditionally 

accepted will be permitted to 

implement its own program for a period 

of not more than three years absent 

extension of this period by HUD. 

(f) Inclusion in State plan. If a State 

dispute resolution program is part of a 

State plan, it will be reviewed annually 

as part of the State plan. 

§ 3288.215 Effect on other manufactured 

housing program requirements. 

A State with an accepted dispute 

resolution program will operate in lieu 

of HUD’s Manufactured Housing 

Dispute Resolution Program established 

under subpart B of this part 3288. A 

State dispute resolution program, even 

if it is an accepted dispute resolution 

program under this part, does not 

supersede the requirements applicable 

to any other aspect of HUD’s 

manufactured housing program. Any 

responsibilities, rights, and remedies 

applicable under the Manufactured 

Home Construction and Safety 

Standards in part 3280 of this chapter 

and the Manufactured Home Procedural 

and Enforcement Regulations in part 

3282 of this chapter continue to apply 

as provided in those parts in all States. 

Dated: September 27, 2005. 

Brian D. Montgomery, 

Assistant Secretary for Housing-Federal 

Housing Commissioner. 

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