To:  Senator Gramm
Cc:  All Senators

Subject:  Manufactured Housing Legislation - Title VI, S.1452, & Title XI, H.R. 1776

During recent retail lot inspections of new manufactured homes, 535 violations of the federal standards were reported, which of the 535 violations, 520 were reported to be related to the in-plant manufacturing process (Data source - Manufactured Housing Association for Regulatory Reform, MHARR). This should raise a serious question as to how many Inspection Primary Inspection Agencies (IPIA) were involved, and how many homes were actually inspected. Only the appropriate duly appointed committees of congress could obtain this information from HUD, since HUD has refused to share manufacturer compliance information with any consumer organization, in spite of the Acts clear intent to make this type of information available to them:

It would be difficult for any State or other interested public or private agency, to participate in the planning and development of methods for testing and inspection, when HUD denies them access to the information, which would be necessary to determine what needs to be tested and inspected.

At the demand of, MHARR President Danny Ghorbani, HUD ordered its compliance contractor to stop the increased level of compliance inspections, and return to the previous, and limited, level of inspections. It is clear that by limiting compliance inspections, HUD can conceal from Congress and the public, their failure to enforce the federal standards and the manufacturers can conceal their failure to comply with the federal standards. HUD's and the industry's re-action to the increased compliance inspections, and subsequent actions to stop the inspections, shows that HUD and the Manufacturers are not interested in whether or not the standards are being complied with, only that it appears that the standards are being complied with.

It should be noted that these inspections, performed at the retail sales lots could not have included items, which were no longer accessible for visual inspection, such as electrical distribution, plumbing and structural assemblies. It should be alarming to Congress that the in-plant inspection process has no way of ensuring that the manufactures of this product, are producing a product, which meets the federal standards. This could easily explain the "National Fire Protection Association" (NFPA) report, which reveals that the electrical distribution system is the leading cause of manufactured home fires, while cooking is the leading cause of fires in site built housing.

The retail lot inspections also undermine the industry's ability to claim ignorance of the defects in their products, which they use as their excuse for selling these defective products to the public.

The manufacturers of course would prefer to deliver their defective products to the purchaser, since once in possession of the purchaser, the purchaser is virtually powerless to obtain the repairs, which are necessary to bring the home into compliance with the federal standards. HUD has chosen to ignore their responsibility under the Act, to enforce the standards as intended by Congress. When this is combined with the consumer's inability to sue a manufacturer, when the manufacturer refuses to correct the non-compliances in the purchaser's home, it leaves the financially challenged manufactured home purchaser, with little or no recourse to remedy the problems with their home.

It should be noted, in Danny Ghorbani's article, from which the statements were taken concerning the 535 non-compliances, there was no statement of concern that their products had cleared the in-plant compliance inspection process, with so many violations of the federal standards. There was only concern that they were being prevented from selling these same defective products to the public, until the non-compliances were corrected!

To knowingly sell these defective products to the public is a violation of Federal law. HUD's decision to curtail these inspections was mutually beneficial for both HUD and the Industry. This decision was not based on the MHCSS Act as the industry asserted and HUD readily agreed. However, the law clearly envisioned whatever inspections are necessary to protect the purchaser and the public:

The Act clearly gives HUD the authority to perform retail sales lot inspections, for the purposes of enforcing the FEDERAL STANDARDS. This recent decision by HUD to curtail the retail sales lot inspections had nothing to do with protecting consumers and the public as the Act clearly intends. HUD has historically sided with the manufacturers of this product, regardless of the consequences to the public’s safety, which might result from such decisions.

In the case of Macmillam v. Redman Homes, Inc (1998) the Federal Court found; "A strong argument can be made that private purchasers were the intended beneficiaries of the Manufactured Housing Act."

The timing of this decision coincides with the Manufactured Housing Industry's latest legislative activity to make the original Congressional intent and purpose of the Act (consumer safety), subservient to affordability; and what is affordable, remains undefined in any version of the current proposed legislation, sought by the industry. This legislation, should it pass would of course, nullify the Court's statement that the Act is intended primarily for the benefit of the purchaser.

What is affordable housing, Senator Gramm? If it is cheap housing, and the evidence appears to support that this is what HUD and Congress think affordable means, we can achieve this without National Manufactured Housing program, that leads us to believe that this affordable housing, not cheap housing. HUD's current concept of this program, and Congress's failure to ensure that HUD carried out its Act as intended, provides nothing more than a "liability shield", under which the manufacturers can sell their defective products to the public.

If on the other hand "affordable" means housing that affords durability, quality, and safety, then this proposed legislation does not support this objective! The proposed legislation will allow for the federal standards to be continually lowered everytime the manufacturers find a way to make this product cheaper, not safer! To restate, part of the reason for this is that "affordable" remains undefined in any version of the proposed legislation for manufactured housing. HUD's history in this program has shown that affordable will ultimately mean whatever HUD and the manufacturers want it to mean. In addition, HUD has intentionally excluded consumers from participating in determining what "affordable" means to them! The track record of this industry has shown that safety, quality, and durability will be sacrificed if providing the same increases the cost of the home. This is not true however, with respect to adding "bells and whistles" which add costs too, but which are designed to increase sales, and too increase profit margins. The "bottom line" is, they will sacrifice any added cost to make the home safer, in order to show how much less manufactured housing costs vs. conventional "stick built" housing. What consumers want it to mean, can only be insured by Congress!

The proposed legislation will condone this industry practice, which HUD supports and it appears that Congress may as well. The proposed legislation will require the federal government to promote the quality, durability, and safety of this product even though the product that this industry produces does not warrant this assertion. It is hard to imagine Congress wanting to promote manufactured housing to the public as a quality product, in light of the “520 violations related to the in-plant construction process” noted by MHARR President, Danny Ghorbani.

The True Cause of Consumer Problems

Congressman Frey, 1973 congressional testimony before the Senate Subcommittee on Housing and Urban Affairs:

"These changes were the result of new information being brought to my attention as well as the opposition of HUD to actually enforcing construction standards, as opposed to setting standards."

Senator Brock, 1973 congressional testimony before the Senate Subcommittee on Housing and Urban Affairs in response to legislation opposition testimony:

"But I think the testimony as presented, as I read it-as I said, I did not hear it-is misleading at best. It represents at least a misunderstanding of the clear language of the bill and perhaps worse, a some what demagogic approach to it".

"But I think it is somewhat deleterious to the legislation that I have proposed to have testimony that is not factual and not based upon the clear language as stated".

It is apparent from the testimony before the Senate Subcommittee on Housing and Urban Affairs in 1973 that HUD did not want the responsibility of enforcing the standards. The testimony also shows that the manufacturers and their supporters were trying to misrepresent the language in the bill, in an effort to influence its final construction, in a way that suited the manufacturer's needs. Congress was not swayed by these attempts into writing, such legislation that would create a program, which could hinder the inspection and enforcement activities of regulators in a manner, which could not assure the public's safety. HUD was however, already biased in favor of a program that would not require them to enforce the standards, and thereby, interpreted the Act in a manner (artful interpretation) that greatly reduced, and in some instances, eliminated their responsibility to enforce such standards.

Black's Law Dictionary

Extravagant Interpretation is that which substitutes a meaning evidently beyond the true one. It is therefore not genuine.

Predestined Interpretation takes place if the interpreter, laboring under a strong bias of mind, makes the text subservient to his preconceived views or desires. This includes "artful" interpretation when the interpreter (in this case HUD) seeks to give meaning to the text other than the one he knows to have been intended.

Note: Emphasis added

Senator Taft, 1973 congressional testimony before the Senate Subcommittee on Housing and Urban Affairs

"The finest standards are obviously meaningless without strict enforcement"

Strict enforcement of the standards is the primary and predominant consumer protection offered by the Act, because as Senator Taft put it, the finest standards are meaningless without strict enforcement. Without strict enforcement by HUD, this program was doomed from the start to achieve its objective and the lack of inspections and enforcement against the manufacturers, is the primary cause of consumer problems with this product today. It is not the MHCSS Act that is the problem, which is what the industry and HUD want Congress and others to believe.

The proposed legislation actually reduces the monitoring of manufacturers and their agents, or better stated, legitimizes the lack of monitoring by HUD of the manufacturers and the manufacturer's agents. The term periodic, contained in the proposed legislation, will mandate predetermined or scheduled monitoring inspections. The manufacturer's history has shown that they do not comply with the standards, and the recent retail sales lot inspections bear this truth out. No reasonable person can expect this program to be effective at protecting the purchaser and/or the public from unreasonable risk of injury or death, when the manufacturer will always know what day(s) they will be monitored for compliance with the standards, and retail lots will be excluded from standards compliance inspections. One of the objectives of this industry-drafted legislation is to severely limit monitoring activities that could result in enforcement actions against them, such as those that resulted from the retail lot inspections.

HUD's "artful" interpretation of the Act has produced a program that has little chance, if any, of providing a home to the first purchaser that meets the federal standards. The proposed legislation will prevent any future Secretary from carrying out whatever monitoring activities that he may deem necessary, to protect the public from an unreasonable risk of injury or death.

HUD and the industry claim we need this legislation to provide for a National installation standard. HUD has always had authority to enforce the federal standards through the completion of the sale to the purchaser as defined by Title 42 USC, Sec. 5409, which prohibits the sale of a home to the purchaser, which does not comply with the federal standards. It is definitively and legally impossible for the retailer, distributor, and/or dealer to be the consumer of the manufacturer's products. The sale of a product, under a retail sales contract is not complete until all the terms of the contract are fulfilled, and retail sales contracts for this product, almost always include delivery and setup (installation) of the home. Who is responsible for compliance is so simple that HUD and the industry have managed to convince most everyone that this is a complicated issue, and it is not.

It is the responsibility of the manufacturer of this product, just as it is for the manufacturer of any other MANUFACTURED PRODUCT to accept responsibility for their defective products and ensure that these defects are corrected within a reasonable period of time, and in a reasonable manner. If the defect is caused by such dealer, retailer, distributor, or other agents of the manufacturer, it is the manufacturer's responsibility to take action against the person(s) responsible for causing the non-compliance, and ensure that the home is brought into compliance. It is the responsibility of the manufacturer to decide if this action entails remedial training or termination of their relationship with such person(s), and it is HUD's responsibility to ensure that appropriate actions are taken by the manufacturer against their agents, to assure the public's (not just the purchaser) health, safety, and welfare. If the manufacturer does not the Secretary has the authority to take whatever appropriate action he feels is necessary to assure the public's health, safety, and welfare.

The above part from title 42 is to clarify who is responsible for the actions of the dealers, retailers, or distributors. By the Act requiring the existence of a legal relationship between the manufacturer and their agents, it assures that the manufacturer will always have legal control over their agents, thereby, making the manufacturer legally responsible for the actions of their agents. HUD has always had the authority to enforce the standards through to the completion of the home; they just did not want the job, and Congress has failed to ensure that the Secretary is carrying out his responsibilities under their MHCSS Act.

Senator Gramm, we do not believe it is your intent to participate in the passage of legislation that undermines the principal consumer protections offered by the current Act. Your letter, to Allen Greenspan concerning the "artful" interpretation of an Act, that carries your name in the title, makes it clear that you certainly do not support the "artful" interpretation of Congressional Acts. We are hoping that by bringing this to your attention, that you will choose to shelve the manufactured housing legislation, which is opposed by many organizations, some of which are listed below, until such a time as comprehensive discussions can take place between the parties that are affected by this legislation.

Sincerely,

John Taylor
The American Internet Society of Manufactured Home Owners

Deborah Chapman
The National Foundation of Manufactured Home Owners

Joe Underwood
Consumer Recovery Agency &
National Complaint Information Center

CharlesHopper
Recreational Vehicle/Mobile Home Owners' Association of the Valley (TX)

Nancy Seats
Homeowners Against Deficient Dwellings

F. Terry Callahan
Manufactured Housing Homeowners Association of Texas, Inc.