MHCC Regulatory Enforcement Subcommittee Meeting – August 17, 2011 Report And Analysis

The Regulatory Enforcement Subcommittee of the Manufactured Housing Consensus Committee (MHCC) held a telephone conference call meeting on August 17, 2011.  The meeting did not feature votes on any substantive issues, as there are no current pending regulatory matters that HUD has either brought or assigned to the subcommittee, under the expanded powers it assumed for itself under the most recent MHCC bylaws.  Instead, the meeting was more in the nature of an informational session for newer subcommittee members to update them on the status of several matters that the subcommittee and the MHCC, as a whole, have already addressed. Nevertheless, there were important announcements regarding a number of those matters, as is explained in greater detail below.
As was reported in detail by MHARR at the time, HUD, in a 2009 vote, was unable to obtain MHCC consensus approval on a series of proposals to modify provisions of the Procedural and Enforcement Regulations (PER) relating to the duties of third-party Primary Inspection Agencies (PIAs) and their relationship to both HUD and HUD Code manufacturers.  As an outgrowth of this rejection, that was based specifically on HUD’s failure to provide adequate justification showing the need for such changes, as well as its failure to provide concrete information regarding the cost-impact of its proposals, HUD initiated, without further rulemaking or MHCC involvement, its costly expansion of in-plant regulation based, ostensibly, on “voluntary compliance.” Subsequently, compliance with this program was deemed “not optional” by HUD, despite HUD’s own failure to follow all of the procedural requirements of the Manufactured Housing Improvement Act of 2000 or other applicable law.  To make matters worse, HUD, on February 5, 2010, issued an “interpretive rule,” without opportunity for public comment, which simply read the provision of the 2000 law (section 604(b)(6)) requiring MHCC consideration and related rulemaking for any change in “inspection practices” – out of the statute.
Now, though, as announced by HUD regulators at the August 17, 2011 meeting, the Department plans to go forward with a proposed rule relating to the role and activities of the PIAs, and a continuing in-plant regulatory expansion, without further consultation with the MHCC and despite the absence of an MHCC consensus resulting from its own failure to provide justification and cost information the MHCC is required to consider by section 604(e) of the 2000 law. Questioned about this procedure, HUD’s representative stated that the MHCC had “had its chance.”
This position, however, once again flouts the pertinent requirements of the 2000 law. Section 604(b) of the law requires that the MHCC consider every proposed PER regulation, absent a declared emergency.  Further, as noted above, section 604(e) of the law requires that the MHCC, as well as HUD, consider the cost-impact and justification for any such proposed regulation.  The MHCC, though, has never been provided with such requisite information by HUD.  As a result, there are two possible scenarios in this matter, both of which violate the 2000 law – (1) if HUD’s new proposal is in any way different from the proposal rejected by the MHCC in 2009, then it has never been considered by the MHCC and violates section 604(b); (2) if the new proposal is identical to the 2009 proposal, it still has not been properly presented to and considered by the MHCC in accordance with the law, because mandatory elements required for MHCC consideration in accordance with the law – cost-impact data and a showing of justification – were never provided.  Put differently, if HUD’s position were correct, the Department could effectively evade the consensus requirements of the 2000 law on every proposal simply by refusing to provide the MHCC with cost-impact, justification, or other  information needed or required for MHCC review and consensus comments.
HUD regulators, in an attempt to minimize this end-run around the MHCC, noted that Committee members could submit comments during the public comment period on the proposed rule, but this misses the central point of the MHCC and the program reforms of the 2000 law – that regulatory changes should be made through an open process based on the consensus agreement of all program stakeholders – unlike the dysfunctional HUD regulatory procedures of the 1980s and 1990s..  But there is not – and never has been — a consensus on any changes relating to the role of the PIAs.
Based on the statements made by HUD representatives during the conference call, MHARR is undertaking a complete analysis of this legally questionable procedure, going back to its origins and the full MHCC record on this matter, and will present its findings at the Fall 2011 MHARR Board of Directors meeting for review and consideration.  And, in all other respects, given the importance of this issue for manufacturers — particularly for smaller producers — MHARR will continue to oppose any needless, unwarranted and costly systematic expansion of HUD regulation in manufacturing plants.    
The subcommittee was provided a very brief background report regarding the substance of Subpart I as well as MHCC activity on various proposals to modify that section of the PER regulations.  In response to an inquiry from a subcommittee member seeking additional information, MHARR’s representative noted that the Association had filed extensive comments on April 14, 2011 in response to the HUD-proposed Subpart I rule — including a complete discussion of the history of Subpart I and efforts by the MHCC to amend and reform its provisions – and urged all subcommittee members to review those comments, which are available on the internet at
(HUD Docket FR-5238-P-01/RIN 2502-AI84).  Most significantly, HUD regulators participating in the conference call indicated that a final Subpart I rule is in the “final clearance” stage at HUD prior to publication, but, as is usual, could not provide any information on the likely timeframe for its issuance.   
HUD issued a proposed on-site completion rule on June 23, 2010.  MHARR filed extensive comments seeking certain changes to the HUD proposal on July 29, 2011.  HUD reported that a final rule in this proceeding has been drafted, but is subject to further review within the program that will be impacted by the departure of the former career-level program management and the appointment of a new acting Deputy Administrator.  Given the need for further review of the pending draft, HUD could not offer any indication of when the final on-site rule will be published.
As explained in detail by MHARR in prior reports, the MHCC has previously considered proposals offered by the recreational vehicle (RV) industry and HUD to change section 3282.8(g) of the PER regulations that defines “recreational vehicles.”  On March 29, 2010, the MHCC submitted consensus recommendations to HUD that effectively urged the Department to maintain its current regulatory definition of RVs that are not self-propelled (i.e., 400 square feet or less in area) (self-propelled RVs are already exempted by the existing definition).  HUD had not taken any further action on these recommendations, but in the interim, according to HUD representatives participating in the conference call, the Department was contacted by a member of Congress urging HUD to reconsider the definition issue.  As a consequence of that communication, it was reported that the new acting program Deputy Administrator has decided to re-visit potential changes to the pertinent PER provision and that a further HUD proposal on this subject will be brought to the MHCC, possibly at its upcoming October 18-20, 2011 in-person meeting.
MHARR will continue to closely monitor all MHCC activity related to this matter, and will update you accordingly.           
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As MHCC activity intensifies in advance of the October 2011 in-person meeting, MHARR will continue to closely scrutinize all pending issues and subcommittee proceedings.
 Mark Weiss
Senior Vice President
Manufactured Housing Association for Regulatory Reform

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