To: The Manufactured Housing Consensus Committee
Subject: Commentary on Subpart I Proposal
While Mr. Matchneer and others did an admirable job of explaining why this proposal had no statutory support, it appears based on the vote and some of the comments, a large number of committee members do not believe them. Since the language in §5414 of the Act is clear and concise and supports Mr. Matchneer and others, it seems appropriate to quote Senator Brock (R), who introduced, gathered support, and carried the original legislation through to its enactment in 1974.
"But I think it is somewhat deleterious … to have testimony which is not factual and not based upon clear legislative language as stated." [Senator Brock—July 24, 1973]
This statement was part of a very STRONG negative from Senator Brock in regards to a notion put forth by some who had testified before the Senate Subcommittee on Housing and Urban Affairs, that the legislation would permit the manufacturers to do what amounted to, self-inspection/certification of their product. Senator Brock’s made it abundantly clear that the legislation unmistakably provided for each home to be subjected to government inspections by government employees or by private organizations under Direct Contract with the government. It is evident from Senator Brock’s statement that you can take what is written in this chapter at face value – it means nothing less or nothing more.
Even though it presently seems doubtful HUD will advance this Subpart I proposal to final rule--bearing in mind that such regulations are now promulgated via §5403 versus §5424--it seems fruitless to waste valuable time on that which has no chance of surviving judicial review under §5405 of this chapter.
Before moving on, this is not intended to be an all-encompassing condemnation of HUD, officers or employees of HUD, the SAA, officers or employees of such SAA’s, manufacturers, officers or employees of such manufacturers, industry associations, or officers or employees of such associations. In addition, this commentary addresses holding component or material suppliers or distributors accountable in the manner proposed by this committee because this illustrates the fallacy of this Subpart I proposal.
It should be noted that Congress uses the term "shall" exclusively whenever they address the manufacturer’s responsibility for doing something under this chapter. Simply, there are no conditions provided by Congress where the manufacturers may elect whether to carry out the duty assigned to them by Congress under this chapter. In addition, Congress provides no authority under this chapter for the Secretary to modify, amend, revoke, etc., any duty assigned to the manufacturer by Congress. Simply, no one other than Congress in accordance with the articles of the Constitution can provide a means for the manufacturers to forgo or opt out of any duty assigned to them under this chapter. Along with this, this committee does not have the Constitutional authority to modify, amend, revoke, etc., any duty assigned to the manufacturer by Congress under this chapter.
While this is true, no one can force the entity assigned the responsibility for enforcing such duty to prosecute such failure to carry out an assigned duty. However, this failure does not alter or excuse the manufacturer’s legal obligation to such duty; a person who acts to circumvent the intent of the law, regardless of whether they violate the wording of the law, acts in fraud of the law, and while the punishment can be removed, the guilt is perpetual.
When such unwarranted liberties are taken, the law becomes arbitrary or capricious for all those who were intended to derive a legitimate benefit from an Act of Congress. It is evident from the experiences of purchasers who tell their stories that such arbitrary application of law, has been a major contributor to the mental, physical, and financial injury for far too many purchasers of this product.
In addition, arbitrary enforcement is a major contributor to this product’s less than flattering reputation, insofar as it stands as an obstacle to those manufacturers who would embrace their duty, if not otherwise forced to compete against those, who make a conscious decision to shun their duty under this chapter. Without effective and non-arbitrary enforcement, the gains made by shunning one’s duty far outweigh the consequences for making such a choice.
While it may not have been the intent of some of those who voted in favor of this proposal, this proposal would in all likelihood lead to a further degradation in the durability, quality, and safety of this product. This would occur by eliminating what little chance a consumer has for remedy under the current regulatory structure.
It should also be noted that the Courts have repeatedly held that a purchaser does not have the right to sue a manufacturer under this Act for a manufacturer’s violations of this Act. To paraphrase the courts, that is because the Act provides the purchaser with the right to timely and equitable relief. The question that has never been put forth to the courts is: What legal recourse does a purchaser have when their right to timely and equitable relief under this chapter is broken, impaired, infringed, etc., by an agency charged with assuring their right is not broken, impaired, infringed, etc.?
What is Risk Management
Risk management is a discipline for dealing with the possibility that some future event will cause harm (product liability).
In manufacturing, a failure to exercise due care in the design, inspection, and fabrication of the product significantly increases the risk of such harm. Corporations deploy various means for managing this element of risk, for which the most effective tool deployed, is a carefully planned quality assurance program.
Quality Assurance & Risk Management
An effective quality assurance program not only seeks control the manufacturer’s internal process (all of them, including sales), it reaches out to the vendors of components and/or materials to assure the quality of the components or materials, which will be used in the fabrication of the end product. In general, manufacturers accomplish this by:
There are a variety of means open to the manufacturer for qualifying such components or materials. Generally, such includes:
An effective quality assurance program seeks to improve product reliability/quality in several ways, which includes:
ONLY when the root cause has been identified can the quality assurance process be properly scrutinized to determine if the defect could have been prevented and what corrective actions can be taken to prevent the defect in the future. In cases where the root cause is of a nature that it poses an imminent danger, manufacturers have been known to shut down the affected line until a solution has been found and implemented. It may also be determined at the conclusion of a good faith investigation that the cause was not within the manufacturer’s control. Regardless, one of the most fundamental requirements of an effective quality assurance program is to:
Failure to follow this course significantly increases the corporation’s risk (liability). This is, unless the corporation has been provided with the means to transfer such risk onto others, and/or, has been provided with the means to make it very difficult, if not impossible, to discover such increased risk. When the auditor (HUD) is the entity that purveys such means to the manufacturer, there is no limit to how far unethical or greedy people will go to further their self-serving interests.
Defective Class of Products
As for more than one manufactured home or a class of manufactured homes, no statutory authority exists in 42 USC, Chapter 70, to support such a notion. This, then, is a contributor to the arbitrariness of the current HUD regulations, and it would be no different for this proposal if adopted as a final rule.
The field of products affected by a defect(s) is an internal quality assurance necessity and it would be blatantly irresponsible for any corporation, to forego making such determinations. A manufacturer incurs liability or risk at a linear rate, which the controlling factors for the rate of assent are the number of products affected, and the amount of financial harm per affected product, that can be incurred by the corporation. Given this mathematical certainty, determining how many products are affected by a particular type of defect is a natural part of managing a corporation’s risk.
To determine a class of products, there must be a first. A good faith investigation of the "first" provides the data points that are NECESSARY for determining "where" and "how" a particular defect was introduced into the product. If either one of these data points is lost or obscured, it becomes exceedingly difficult to determine how many products are affected by any particular defect. If the procedures [footnote1] set forth in 42 USC §5414 are followed, there is simply no justification for cluttering or confusing the statutory mandate that the manufacturer address "any defect in any manufactured home, produced by such manufacturer" [42 USC §5414(a)]. It seems redundant and it should be unnecessary to define the meaning of "any".
1 42 USC §5422(5) - …notification and correction procedures under section 5414 of this title
Proactive versus Reactive Approach
Once you climb outside of the box erected by the manufacturers--which to date HUD has aided the maintenance thereof--to hide what lies outside, you might learn that the MHCSS Act was about more than the establishment of minimum standards. It also provides the statutory framework, which if implemented as intended, would force the manufacturer to incur the expense of establishing and maintaining an effective PROACTIVE quality assurance program. Because implementation was not carried out as Congress intended, the type of reactive crisis management policy this industry was known for in 1974 remains this industry’s mainstay for addressing defects in their products.
Cost benefit of a Reactive only Approach versus Proactive Approach
Buck-passing was in 1974, and is today, the primary tool used by the manufacturer to mitigate the cost of their standardized reactionary approach to addressing defects, in the products they produced and introduced into the market place. When buck-passing is deployed to mitigate risk, the cost of the reactionary only approach is minimal because it is difficult at best to hold the manufacturer accountable for the defect(s) in their product (risk reduction).
Such policies in the hands of scrupulous manufacturers normally do not have a significant consequence to the end user of the product, because a scrupulous manufacturer generally makes some level of executive and financial commitment to a proactive quality assurance program. This commitment is limited, however, by the need to be cost competitive (much more than final product cost) with the unscrupulous manufacturer who makes little, if any, executive and financial commitment to a proactive quality assurance program. The unscrupulous manufacturer remains hell bent on defending or protecting the Status Quo reactionary approach for dealing with defects in their products, because as it is currently deployed, it enables them to mitigate the risk and cost by passing the buck. This would not be possible if HUD had implemented the MHCSS Act as Congress had intended.
Undermining the Basis for Quality Assurance
The quality assurance doctrine conveys to the end user that the manufacturer is responsible for all stated aspects of the performance of their product. This Subpart I proposal undermines the doctrine on which every legitimate quality assurance program in the world is based. To preclude a very lengthy discussion of why, suffice it to say that such a concept would create an environment of buck passing not seen since 1916, when the product liability vaccine (doctrine) was introduced to eradicate this disease from the United States. The manufacturers of this product have never been forced to take the vaccine even though a law was established to force such to occur.
When a product manufacturer is permitted to pass the buck for defects in the components or materials used by them in the production of their end product, they have effectively been let off the hook for the quality, durability, and safety (performance) of their end product. Simply stated, there is virtually no instance where a defect in the end product cannot be blamed in some manner on some component or material, used by the manufacturer in the fabrication of their end product. Given no provision was made in this proposal to authorize HUD or the SAA to prohibit the manufacturer from buying components or materials from whomever they choose, the idea of holding the product supplier or distributor accountable is a notion that should not have been approached by this committee. To broach this problem, even more extensive and invasive provisions would have to be added to what is already an overreaching and mountainous regulatory proposal.
This is best left in the hands of the manufacturer, who as a manufacturer has a duty to assure that the components or materials they use in the fabrication of their product meet the design or performance criteria set forth in their design, and that such components are installed in a manner that achieves the manufacturer’s stated design or performance criteria.
The Danger of an Unwarranted Reduction of Risk
Beginning in mid 1996, there was a marked and apparent increase in the number and severity of complaints from manufactured home purchasers. This increase inexplicably followed HUD’s March 15, 1996, publication of a final rule. Analysis of the changes made to the Manufactured Home Procedural and Enforcement regulations reveal that such changes had the effect of reducing the manufacturers’ risk of delivering defective products into commerce. Consistent with manufacturing values related to risk management, a reduction in risk could have attributed to a reduction in due care in the design, inspection, and fabrication of this product. Such in the hands of an unscrupulous manufacturer makes this a high probability. HUD issued the final rule without allowing for a public comment period. The justification for foregoing the public comment period was as follows:
"This rule merely removes unnecessary regulatory provisions and does not establish or affect substantive policy. Therefore, prior public comment is unnecessary."
And;
"The General Counsel, as the Designated Official under Executive Order 12606, The Family, has determined that this rule will not have the potential for significant impact on family formation, maintenance, or general well-being, and thus is not subject to review under the Order. No significant change in existing HUD policies or programs will result from promulgation of this rule"
Perhaps this was true in the moment, but there is a strong correlation between when this final order was issued and the methodical spread of a disease that has rendered this program virtually impotent in protecting the rights afforded to the purchasers of this product under the MHCSS Act.
Given the nature of HUD’s justification for foregoing the public comment period, HUD’s mandate from Congress under §5407 to conduct such research, and other statutory requirements to thoroughly investigate the effect that such final rule may have prior to issuing such final rule, HUD should take the lead in assuring their final rule did not have a negative impact on the family (singular) as set forth in Executive Order 12606.
A Simple Solution that Streamlines the Regulatory Process
A feasible alternative to the overreaching and lengthy regulatory process proposed by this committee--which is not within the statutory scope of this Act of Congress anyhow--is to propose a regulation that would require the manufacturer to establish franchise/legal agreements with its dealers. The automobile industry can provide a model franchise agreement to help lay out a regulatory proposal for such a regulation. Through such agreements, the manufacturer can hold the dealer or any agent thereof, accountable for failing to meet their contractual obligations. Such agreements should contain a manufacturer mandate to the dealer that the dealer retain control (by contract or legal agreement) of all aspects of the homes’ transportation to the home sites and completion at the home sites. In fact, for this reason, it was and remains today, the Congressional intent that such legal agreements be established between the manufacturers and the dealers who sale the manufacturer’s products.
42 USC §5413(g)(1) ... at each location where any such manufacturer's manufactured homes are offered for sale by a person with whom such manufacturer has a contractual, proprietary, or other legal relationship and in a manner determined by the Secretary to be appropriate
This of course has never happened, and this committee has the unique opportunity to put forth a proposal for a regulation that would implement this statutory requirement. Congress intended the manufacturer to retain control of their product through to the on-site completion of their product by taking control of their sales and/or installation agents through franchise or other legal agreements. The 93rd Congress wrote in the legislative record for the Manufactured Home Construction and Safety Standards Act of 1974, that a manufactured home shall be –
in compliance with all applicable standards under section 604, including … by way of example, but not limited to the setup of the home, and the installation and connection of accessories and utilities … when delivered to the buyer
Congress provided a definition towards this end that, by estoppel, makes any person who engages in any activity that has an impact on the durability, quality, and safety of the manufacturer’s manufactured home, an agent of the manufacturer [42 USC §5402(1)]. It should be noted that Congress placed this definition at the very beginning of §5402 even though it was alphabetically out of order, showing a strong Congressional emphasis on this definition.
Such an approach would significantly streamline the regulatory structure or process since the manufacturer would be required to internally establish processes designed to carry out what is a manufacturer’s duty or responsibility in the first place.
Simply stated, under such a structure, the manufacturer would not be afforded with the opportunity to shun their responsibility to the purchaser for the durability, quality, and safety--which are all synonymous with performance--of the manufacturer’s manufactured home. As the principal in the agency relationship established by such franchise/legal agreements, they are forever bound to the purchaser of their product for the performance of their product. The manufacturer will be left with little choice but to extend his quality assurance program to the home site if he intends manage his risk, thereby assuring the purchaser that the manufacturer’s certification of compliance with all applicable federal standards is valid when the purchaser first occupies the home. Any failure to establish processes for the effective management of all aspects of risk would have a negative impact on the manufacturer’s ability to raise capital or investment dollars. This equates too the manufacturer having more than regulatory compliance interest for establishing effective proactive quality assurance programs.
A manufacturer, or any other party bound by contract, would have legal recourse against any person who violates their contractual obligation towards assuring the validity of the certification. However, such recourse would not interfere nor delay the purchaser’s right to timely and equitable relief, since the affected party’s relief is dependent not on future damages, but damages that have been incurred. Simply put, they can’t recover their losses until they have incurred a loss. Moreover, delaying remedy increases risk.
Finally, it is doubtful if scrupulous manufacturers would resist such a regulatory requirement, since most would embrace such a course if not forced to compete against unscrupulous manufacturers who defend the Status Quo reactionary buck-passing system for addressing defects in their products.
The extension of the manufacturer’s quality assurance program to the home site would have a significantly positive impact on their products reputation. A home that complies with the current standards when completed at the home site, consistent with the manufacturers design for said home, will perform comparatively, if not better than, most low end site-built housing.
The Subpart I Proposal
The following are direct quotes from the proposal:
It is the policy of these regulations that all consumer complaints or other information ... should be referred to the manufacturer and/or retailer and/or other responsible party.
When a consumer complaint or other information indicating the likely existence of a non-compliance defect, serious defect, or imminent safety hazard is received by a State Administrative Agency or the Secretary, the SAA or the Secretary shall forward the complaint or other information to the responsible party.
If the responsible party receiving the notice believes the issue is the responsibility of another responsible party, the information may be forwarded to that party.
All else in this proposal is fluff or smoke and mirrors intended to hide or obfuscate the ominous nature of the text in the above sentences. Judging by the vote for this proposal, the illusion appears to have been very effective on all but a few members of the MHCC.
As per the policy of these regulations, regardless of the source by which the information or complaint arrives, the responsible party can simply forward such complaint or information to another party. Excluded from this proposal, is any requirement to provide justification for such a decision, nor is the party required to notify the Secretary or SAA of this decision, nor is any record required to be kept by the forwarding party for review by the Secretary or SAA at some undetermined or undefined interval.
Nothing else needs to be said; the responsible parties can pass the buck from party to party and back until the consumer decides they are getting the runaround. As per the policy that would be set forth by this proposal, the Secretary or SAA then forwards--not copies--the complaint or information to the responsible party they guess might be the right one, where it starts all over.
Mixing Consumer Protection and Dealer Indemnity
It is not in the best interest of consumers to mix dealer indemnity [42 USC §5412] with consumer protection, as is being done in this proposal. The two statutory citations should be implemented independently of one another to assure that neither of the parties afforded protection under these independent citations has, their rights diluted by what serves the best interest of the other party. Given the two sections are unrelated in so much as they provide for completely different courses of remedy to the party covered by the citation, sound and proper regulatory construction dictates that they should be implemented independently of one another.
Dispute Resolution
As for dispute resolution, a State may or may not choose to enforce this, but it is certainly unenforceable at the federal level. Simply stated, a law that does not provide for penalty for failing to comply is directory in nature and as such, is unenforceable. As well, it does not provide for remedy to the purchaser, whereas, §5414 provides a course for remedy and provides for enforcement, if the remedy is not provided by the manufacturer, or he fails to provide remedy as ordered. Given this, the same rule above in regards to sound regulatory construction, applies here as well.
"Where the power lies in the few it is natural for them to sacrifice the many to their own partialities and corruptions."
[James Madison—October 17, 1788]
Sincerely,
John Taylor
Citizen Activist
Elgin, TX 78621
TAISMHO
Kristen Zehner, State President
Wisconsin Mfg. Home Owners Assn. Inc.
WIMHOA
Zoe Ann Olson
Boise, Idaho 83709
Nancy Seats, President
Homeowners Against Deficient Dwellings—HADD
Member: National Alliance Against Construction Defects
Kansas City, Missouri
HADD
Raymond C. Brostean
Tennessee State Representative for H.A.D.D.
A National Not for Profit organization
Sonia S. Mayrath
Secretary, HADD National Board of Directors
HADD of Colorado (Homeowners Against Deficient Dwellings--A national non-profit
organization)
Member: National Alliance Against Construction Defects
Longmont, Colorado
Diane Everett
WI Chapter Representative
Homeowners Against Deficient Dwellings (HADD)
Pleasant Prairie, Wisconsin 53158
Steven Vinson
Georgetown, Kentucky 40324
US Army Retired, Vietnam Veteran (NEVER SURRENDER)
President, KY Chapter HomeOwners Against Deficient Dwellings (HADD)
Member, National Alliance Against Construction Defects (NAACD)
Member, HomeOwners For Better Building (HOBB)
HADD
HOBB
Katie Swenson
Florida HADD Representative
National Alliance Against Construction Defects
Ken Moulton
HADD - (Homeowners Against Deficient Dwellings)
Co-President CT, MA, NY, RI and NH Chapters
Member, NTMC (National Toxic Mold Coalition)
Member, OQRC (Oklahomans for Quality in Residential Construction)
Cindy Schnackel
Homeowners Against Deficient Dwellings
Oklahomans for Quality in Residential Construction
Tracey Kelly
President of New Jersey–HADD
Sheri Williams
HADD Mississippi
Member: National Alliance Against Construction Defects
Director: Manufactured Homeowners Advocate Division
Sandy Skipper-Lopez
Madera, California 93637
National Director, HADD
HADD of California (Homeowners Against Deficient Dwellings, Inc- A national not-for
profit)
Member: NAACD-National Alliance Against Construction Defects
Cecelia M. Smith
HADD Representative for Pennsylvania
Fayetteville, PA 17222
Tracy Schofield
President, Arizona Chapter
Homeowners Against Deficient Dwellings, Inc.
Gilbert, AZ 85234
HADD
Linda Worthington
Homeowners Against Deficient Dwellings
Fleetwood Horror Stories