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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

July 2014: 

Manufactured Housing: 

Efforts Needed to Enhance Program Effectiveness and Ensure Funding 
Stability: 

GAO-14-410: 

GAO Highlights: 

Highlights of GAO-14-410, a report to congressional requesters. 

Why GAO Did This Study: 

Manufactured housing traditionally has been a low-cost option in the 
U.S. housing market. For nearly 40 years, HUD has provided standards 
for the manufactured housing industry by developing and updating the 
HUD Code. The 2000 Act was intended, among other things, to establish 
a balanced consensus process for updating the standards and 
regulations for enforcing them and to encourage manufactured housing 
as an affordable option. GAO was asked to study HUD’s implementation 
of the 2000 Act. 

This report addresses, among other things, the extent to which HUD has 
met key purposes of the 2000 Act and assesses whether user fees cover 
program costs. GAO interviewed and collected data for 2000-2013 from 
HUD, other agencies, and industry groups. GAO also visited large and 
small plants that built manufactured housing to solicit industry 
perspectives. 

What GAO Found: 

HUD has established a process for updating the preemptive building 
standards for manufactured homes known as the HUD Code but has not 
fully met key purposes of the 2000 Manufactured Housing Improvement 
Act (2000 Act). Key purposes of the Act include: 

* Establish a balanced, consensus-based process to update manufactured 
housing construction and safety standards. HUD has not accepted, 
rejected, or modified any of the Manufactured Housing Consensus 
Committee’s recommendations for updating the HUD Code within 1 year of 
their submission. The 2000 Act requires HUD to act on the committee’s 
recommended standards within 1 year if they were submitted in the form 
of a proposed rule with an economic analysis. According to HUD, 
because the committee did not include economic analyses in the 
proposals, HUD staff performed this task. They also stated because the 
proposals lacked the analyses, the Act’s 1-year timeline was not 
triggered. In some cases, HUD has not decided on recommendations made 
more than a decade ago and lacks a plan to address the backlog. 
Meanwhile, some states’ and localities’ residential building codes 
require standards not in the HUD Code, resulting in post-production 
upgrades that may increase costs to homeowners. Not updating the HUD 
Code delays its intended benefit—to improve the quality, durability, 
safety, and affordability of manufactured homes. 

* Facilitate the availability of affordable manufactured homes. Owners 
of manufactured homes have lower monthly housing costs than site-built 
owners and apartment renters, but high financing costs often keep 
these homes from being even more affordable. HUD’s Federal Housing 
Administration (FHA) has two insurance programs for manufactured home 
loans. Although most manufactured homes are titled or owned as 
personal property, HUD’s programs primarily insure loans on 
manufactured homes financed as real estate. Additionally, owners of 
manufactured homes are more likely to have higher-priced financing 
than owners of site-built homes. The 2000 Act required HUD to review 
the effectiveness of the FHA programs, but HUD has not developed a 
plan to do so. Such research would help HUD determine whether and how 
it might further facilitate the availability of affordable 
manufactured homes. 

The 2000 Act establishes HUD’s authority to collect fees for 
certification labels on manufactured homes built to the HUD Code. The 
fees are placed in the Manufactured Housing Fees Trust Fund that 
provides annual appropriations to fund the expenses of the 
Manufactured Housing Program. The current fee rate does not produce 
sufficient collections to fully fund the program’s expenses and must 
be supplemented by annual appropriations from Treasury’s General Fund. 
HUD has indicated its intent to raise the label fee, which currently 
stands at $39. As we provided a draft of this report, HUD issued a 
proposed rule to increase the label fee, but has not yet completed the 
rulemaking process. It has also not fully assessed the feasibility and 
benefits of putting in place other fees authorized by recent 
appropriation acts, in part, because it has carryover balances from 
past years. Without more fee revenue, however, the program will 
continue to require Treasury’s General Fund appropriations. 

What GAO Recommends: 

GAO makes several recommendations, including that HUD develop and 
implement a plan for updating construction and safety standards in a 
timely fashion; develop a plan to assess how FHA financing might 
further manufactured home affordability; complete label fee rule-
making; and assess the need for other user fees. Of these, HUD agreed 
with the first recommendation and partially agreed with the next two 
because it believes it has already taken actions. HUD stated it would 
consider the last recommendation. GAO continues to believe these 
recommendations remain valid as discussed in the report. 

View [hyperlink, http://www.gao.gov/products/GAO-14-410]. For more 
information, contact Mathew J.Scirè at (202) 512-8678 or 
sciremj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Scope and Methodology: 

Background: 

Despite Declining Production, Manufactured Homes Remain an Affordable 
Housing Alternative in Some Regions: 

HUD Has Not Fully Achieved the Manufactured Housing Program's Key 
Purposes: 

Current Funds Collected from HUD Label Fees Are Insufficient to Fund 
the Manufactured Housing Program: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Comments from the Department of Housing and Urban 
Development: 

Appendix II: GAO Staff Contact and Acknowledgments: 

Figures: 

Figure 1: Examples of Single-Section and Two-Piece Multi-sectional 
Manufactured Homes: 

Figure 2: HUD Manufactured Home Placed on a Permanent Foundation with 
a Basement: 

Figure 3: HUD Certification Label: 

Figure 4: States with and without State Administrative Agencies, as of 
May 2014: 

Figure 5: Shipments of Manufactured Homes from 2000 to 2012: 

Figure 6: Manufactured Homes as a Percentage of All Occupied Housing 
Units, by Region: 

Figure 7: Ownership Characteristics of Occupied Manufactured Homes and 
Single Family Homes, 2011: 

Figure 8: Income Characteristics of Owners of Occupied Manufactured 
and Single Family Site-Built Homes and Apartment Renters, 2011 (All 
Areas): 

Figure 9: Income Characteristics of Owners of Occupied Manufactured 
and Single Family Site-Built Homes and Apartment Renters, 2011 (Non-
metro Areas): 

Figure 10: Monthly Housing Costs for Owners of Occupied Manufactured 
Homes, Single Family Site-Built Homes and Apartment Renters 2011: 

Figure 11: HUD's Process for Updating the Manufactured Housing Safety 
and Construction Standards (HUD Code): 

Figure 12: Selected MHCC Recommendations and HUD Updates to the HUD 
Code, 2003-2014: 

Figure 13: Examples of Multi-section Manufactured Homes Joined On-site: 

Figure 14: HUD Label Revenues and HUD Units Sold from Fiscal Years 
2002 to 2013: 

Figure 15: General Fund Appropriations and Carryover Balances for the 
HUD Office of Manufactured Housing Programs from Fiscal Years 2009 to 
2013: 

Figure 16: Collected Label Fees and Anticipated Label Fees from Fiscal 
Years 2009 to 2013: 

Abbreviations: 

AHS: American Housing Survey: 

CFO: Chief Financial Officer: 

CFPB: Consumer Financial Protection Bureau: 

DAPIA: Design Approval Primary Inspection Agency: 

FAR: Federal Acquisition Regulation: 

FEMA: Federal Emergency Management Agency: 

FHA: Federal Housing Administration: 

FHFA: Federal Home Finance Administration: 

GSE: government-sponsored enterprises: 

HERA: Housing Economic Recovery Act 2008: 

HMDA: Home Mortgage Disclosure Act: 

HUD: Department of Housing and Urban Development: 

ICC: International Code Council: 

IPIA: Production Inspection Primary Inspection Agency: 

IRC: International Residential Code: 

MHCC: Manufactured Housing Consensus Committee: 

MHS: Manufactured Homes Survey: 

NFPA: National Fire Protection Association: 

OMB: Office of Management and Budget: 

PATH: Partnership for Advancing Technology in Housing: 

PD&R: Office of Policy Development and Research: 

RHS: Rural Housing Service: 

SAA: state administrative agency: 

USDA: Department of Agriculture: 

VA: Department of Veterans Affairs: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

July 2, 2014: 

The Honorable Randy Neugebauer: 
Chairman: 
Subcommittee on Housing and Insurance: 
Committee on Financial Services: 
House of Representatives: 

The Honorable Spencer Bachus: 
House of Representatives: 

Manufactured housing, which is factory built and can be relatively 
inexpensive, has long been seen as an affordable option for some 
homeowners. For four decades, the Department of Housing and Urban 
Development (HUD) has regulated the manufactured housing industry 
through its Manufactured Housing Program. In 2000, Congress enacted 
the Manufactured Housing Improvement Act of 2000 (2000 Act) to help 
facilitate the availability of affordable manufactured homes as a 
significant resource for affordable homeownership and rental housing. 
[Footnote 1] The Act had many purposes, including protecting the 
quality, durability, safety, and affordability of manufactured homes 
and establishing a balanced consensus process for setting standards 
and related regulations for enforcing those standards. The 2000 Act 
created a new entity, the Manufactured Housing Consensus Committee 
(MHCC), which would be responsible for developing proposed revisions 
to the construction and safety standards and forwarding them to the 
HUD Secretary. 

In 1998, the number of manufactured homes that manufacturers shipped 
to sites across the country reached a high of over 373,000 since the 
Manufactured Housing Program was established in 1974. However, a focus 
on increasing sales volume without fully considering borrowers' 
creditworthiness led to a large number of repossessions from 2000 to 
2002. Further, in 2000 many manufacturers and lenders for manufactured 
homes began exiting the market. Since 2000, the number of homes 
shipped has declined dramatically, falling to under 50,000 in 2009. 
The contraction in the manufactured housing industry was further 
compounded by the broader collapse in home purchases after 2007. 

Further, in recent years Congress, industry representatives, and MHCC 
members have raised questions about the process for updating the 
federal code governing manufactured housing--HUD's Manufactured 
Housing Construction and Safety Standards, or the HUD Code. In October 
2012, we found that HUD had not adopted any changes to the HUD Code 
since 2005 and that 84 recommendations forwarded by the MHCC were 
still awaiting HUD rulemaking actions.[Footnote 2] In December 2013, 
HUD published a final rule that considered and discussed some of the 
MHCC recommendations, and adopted some. As of May 2014, however, HUD 
was still considering many of these MHCC recommendations, according to 
HUD officials. 

You asked that we examine HUD's implementation of the 2000 Act and its 
process for collecting and administering program fees. This report (1) 
describes the availability, use, and affordability of manufactured 
homes; (2) assesses whether certain purposes set forth in the 2000 Act 
have been met, including (a) establishing a balanced process to update 
manufactured housing construction and safety and construction 
standards, (b) facilitating the availability of affordable 
manufactured homes, and (c) ensuring uniform and effective enforcement 
of the manufactured housing standards; and (3) examines whether the 
funds and fees used to administer HUD's Manufactured Housing Program 
are sufficient to cover program costs. 

Scope and Methodology: 

To describe the availability, use, and affordability of manufactured 
housing, we reviewed and analyzed data from the U.S. Census Bureau's 
Manufactured Homes Survey (MHS) from 2000 to 2013 and 2011 American 
Housing Survey (AHS) on the production and location of manufactured 
housing and the characteristics of owners. We also compared the costs 
to occupants of manufactured homes with the costs of other housing 
choices, using available 2012 data--the most recent data available--
from the Home Mortgage Disclosure Act (HMDA) database. By assessing 
related documentation, we found these data to be sufficiently reliable 
for the purposes of describing manufactured housing production trends 
and the affordability and financing of manufactured homes. 
Additionally, we visited large and small manufactured housing plants 
in Indiana and Pennsylvania, selected for their size and proximity to 
our offices, where we obtained information on factors affecting the 
cost of manufactured home sales. 

To assess whether the HUD Manufactured Housing Program was meeting the 
Act's intent for establishing a consensus process for developing, 
revising, and interpreting standards, we reviewed: 

* Federal Register Notices from HUD, from 2002 until 2013, to 
understand the creation of the MHCC; 

* MHCC documents, such as available meeting minutes and voting ballots 
from 2002 until 2013 to assess the timing and topics of MHCC 
recommendations to HUD; 

* proposed and final rules from 2002 until 2013 to assess the status 
of MHCC recommendations; 

* documentation of HUD's efforts to ensure the operation of the MHCC 
and rulemaking process, such as the contract for the administering 
organization and related documents; and: 

* HUD's staffing and other resources allocated to the program. 

We also interviewed HUD officials, six manufacturers in Indiana and 
Pennsylvania, industry representatives, and MHCC officials to obtain 
their views on the process for updating the standards. We compared 
this process with similar processes for establishing widely accepted 
industry construction standards for residences and interviewed 
officials from the International Code Council (ICC), the private 
standard-setting organization that develops model building codes for 
homes other than HUD manufactured homes. 

To assess HUD's efforts to facilitate the availability of affordable 
manufactured homes, we collected and analyzed fiscal year 2012 data 
from Federal Housing Administration (FHA) loan programs. By assessing 
related documentation and interviewing agency officials, we found 
these data to be sufficiently reliable for the purposes of this 
report. By reviewing the number of purchase loans reported we were 
able to examine the extent to which these programs supported loans for 
manufactured homes and compared FHA's support for manufactured and 
site-built homes, using 2012 HMDA data. Because 2012 HMDA data do not 
distinguish between the types of loans made for manufactured homes 
(such as chattel or personal property loans, which are often used for 
manufactured homes, and mortgage loans), we were not able to assess 
the characteristics of different types of loans.[Footnote 3] We also 
collected and reviewed research on manufactured housing from HUD and 
other organizations on the affordability of manufactured homes. We 
interviewed HUD officials from the Office of Manufactured Housing 
Programs and the Office of Policy Development and Research (PD&R) to 
assess HUD's efforts and plans to promote the availability of these 
homes. Additionally, we obtained information from consumer 
organizations and interviewed four of the largest lenders, based on 
HMDA data, which provided loans to owners of manufactured homes, to 
understand the availability of financing for manufactured homes and to 
obtain the lenders' perspective on any challenges involved in 
financing these homes. 

To assess the HUD Manufactured Housing Program's ability to oversee 
enforcement of the HUD Code, we collected audits from HUD's monitoring 
contractor from August 2011 to August 2012 to determine whether audits 
for all plants had been completed as required and evaluated how HUD 
had used the information from the audits. We also reviewed HUD's 
policies, procedures, and mechanisms for enforcing the HUD Code. 
Finally, we obtained information from program officials and state 
administrative agencies, interviewed officials of manufacturers that 
we visited representing large and small manufacturing facilities, and 
discussed enforcement issues with manufactured housing trade 
associations. 

To examine funding for the Manufactured Housing Program, we reviewed 
programmatic data found in HUD's operating plans for the program for 
fiscal years 2009 through 2013. We reviewed annual appropriations, 
yearly program obligations, program carryover balances, and revenues 
raised from the collection of label fees during that period and 
checked these figures against those stated in both HUD's yearly budget 
justifications and congressional appropriations acts. We obtained 
agency data on the use of program obligations and interviewed 
officials from HUD's Offices of Manufactured Housing Programs and 
Budget to understand the agency's goals and strategies for maintaining 
the program and the Manufactured Housing Fees Trust Fund, and efforts 
to assess the appropriate level of label fees and the feasibility of 
instituting other authorized user fees. We compared these practices 
with those found in our user fee guide and previous GAO reports. 
[Footnote 4] Finally, we interviewed manufactured home manufacturers 
to obtain industry views on the potential effects of any label fee 
increases and reviewed statutory and regulatory guidance related to 
the collection and use of user fees. 

We conducted this performance audit from January 2013 through May 2014 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The National Manufactured Housing Construction and Safety Standards 
Act of 1974 and Manufactured Home Construction and Titling: 

HUD is responsible for enforcing the federal manufactured home 
construction and safety standards that it established under the 
National Manufactured Housing Construction and Safety Standards Act of 
1974 (1974 Act).[Footnote 5] The 1974 Act authorized HUD to develop 
construction and safety standards for manufactured homes and to 
oversee the enforcement of the standards through inspections and 
reviews of building plans. HUD developed the Manufactured Housing 
Construction and Safety Standards, commonly known as the HUD Code, 
basing them in substantial part on the National Fire Protection 
Association (NFPA) standards for manufactured homes (NFPA 501). The 
HUD Code was implemented in 1976, and replaced the state-by-state 
patchwork of regulations that existed prior to 1976 with one set of 
rules that all manufactured home builders must meet. The HUD Code is 
applied nationwide and preempts state and local codes. As a result, 
state and local building authorities may not apply their own codes to 
manufactured homes for components covered by the HUD Code. 

Unlike site-built homes, which are constructed at their permanent 
locations, manufactured homes are constructed in factories and must 
have a permanent chassis that allows them to be moved to retailers and 
consumers in different states and localities.[Footnote 6] Manufactured 
homes can be single-section or multi-sectional units with two or more 
sections (as shown in figure 1). Manufactured homes can be placed on 
temporary or permanent foundations (see figure 2). 

Figure 1: Examples of Single-Section and Two-Piece Multi-sectional 
Manufactured Homes: 

[Refer to PDF for image: 2 photographs] 

Example of two single-wides; 
Example of a double-wide. 

Source: GAO. GAO-14-410. 

[End of figure] 

Figure 2: HUD Manufactured Home Placed on a Permanent Foundation with 
a Basement: 

[Refer to PDF for image: 2 photographs] 

Metal chassis above basement. 

Source: GAO. GAO-14-410. 

[End of figure] 

Manufactured homes also differ from modular homes, which are another 
type of prefabricated home and are often designed and constructed by 
the same manufacturers on the same production lines as manufactured 
homes. Like other site-built homes, modular homes are categorized as 
real property and are built to state and local building codes, most 
commonly the International Residential Code (IRC).[Footnote 7] Unlike 
manufactured homes that are towed to the sites on their own permanent 
chassis, modular home sections, or modules, are transported on truck 
beds and assembled on site. For the purposes of this report, we 
include modular homes under our definition of site-built homes. 

Unlike site-built homes, which are titled as real property and usually 
financed through a mortgage, a manufactured home may be financed as 
either personal or real property. When a home buyer purchases a 
manufactured home without tying the purchase to land, the home is 
generally considered personal property, or chattel--that is, it is a 
movable, "personal" possession, much like an automobile. Manufactured 
homes are sometimes grouped together in communities where residents 
may either own or lease the home, but lease the land.[Footnote 8] 
However, according to Manufactured Homes Survey (MHS) data, in 2013 
70.2 percent of manufactured homes were placed on leased or owned land 
outside of manufactured home communities. One lender we interviewed 
told us that homeowners in rural areas often placed manufactured homes 
on real property owned by a relative but did not want to place a lien 
on the land to purchase the manufactured home. 

When a manufactured home is attached to the underlying land by a 
permanent foundation and the home and the land are treated as a single 
real estate title under state law, the home is considered real 
property. In such instances, the borrowers can obtain a conventional 
real estate loan or a government-guaranteed mortgage through 
traditional mortgage lenders. According to the MHS, 13.7 percent of 
manufactured homes that were placed in service in 2013 were titled as 
real estate, 78 percent were titled as personal property, and the 
remainder (8.3 percent) were not titled. 

The Manufactured Housing Improvement Act of 2000 and General Duties of 
the HUD Office of Manufactured Housing Programs: 

The National Manufactured Housing Construction and Safety Standards 
Act of 1974 was amended by the Manufactured Housing Improvement Act of 
2000 (2000 Act) to create a balanced consensus process for 
establishing and revising manufactured home building standards. The 
2000 Act created the Manufactured Housing Consensus Committee (MHCC), 
a Federal Advisory Committee charged with providing recommendations to 
the Secretary on the revision and interpretation of HUD Code and 
related procedural and enforcement regulations.[Footnote 9] 

HUD's Office of Manufactured Housing Programs is responsible for 
carrying out certain provisions of the 2000 Act. Under the law, the 
HUD Secretary is directed to establish appropriate federal 
manufactured home construction and safety standards as well as model 
standards for the installation of manufactured homes. The Office of 
Manufactured Housing Programs is tasked with regularly updating the 
standards based on careful analysis of MHCC's recommendations, the 
manufactured housing industry, and consumers. The Office of 
Manufactured Housing Programs is also tasked with approving certain 
state agencies and private third-party entities that inspect 
manufactured housing plants to determine whether manufacturers are 
complying with the HUD Code. Each manufacturer contracts with two 
types of third-party entities, a Design Approval Primary Inspection 
Agency (DAPIA) and a Production Inspection Primary Inspection Agency 
(IPIA). Generally, DAPIAs review and approve all manufactured home 
designs, design changes, and quality assurance manuals. IPIAs are 
responsible for assuring that the manufacturing plant follows the 
quality assurance manual and inspecting each home at some stage of 
production in the plant. IPIAs also issue the HUD Certification Label 
that is attached to each section of the home upon completion (see 
figure 3 below). 

Figure 3: HUD Certification Label: 

[Refer to PDF for image: photograph] 

As evidenced by this label, no. __, the manufacturer certifies to the 
best of the manufacturer's knowledge and belief that this manufactured 
home has been inspected in accordance with the requirements of the 
department of housing and urban development and is constructed in 
conformance with the federal manufactured home construction and safety 
standards in effect on the date of manufacture. See data plate. 

Source: HUD. GAO-14-410. 

[End of figure] 

Federal Preemption: 

The 1974 Act also established the preemptive status of the HUD Code, 
as it stipulated that if a home is built to the HUD Code, state and 
local building authorities may not apply their own codes that are 
applicable to the same element of performance.[Footnote 10] The 2000 
Act stated that the federal preemptive authority was to be "broadly 
and liberally construed." For instance, a state or local municipality 
cannot require that the distances between a HUD home's air intake and 
exhaust vents be greater than the 3-foot minimum currently stipulated 
in the HUD Code. One particular entity that relies heavily on the 
preemptive status of the HUD Code is the Federal Emergency Management 
Agency (FEMA). FEMA is a large purchaser of manufactured homes, which 
are utilized as temporary housing units under its emergency management 
operations across different states. 

To help ensure that all manufactured homes comply with the HUD Code, 
HUD has entered into cooperative agreements with 37 state governments 
that participate as state administrative agencies (SAA) to conduct 
periodic checks of plant records and to oversee the handling of 
consumer complaints. HUD's staff is responsible for carrying out these 
same functions in the 13 states without SAAs and the District of 
Columbia (see figure 4). 

Figure 4: States with and without State Administrative Agencies, as of 
May 2014: 

[Refer to PDF for image: illustrated U.S. map] 

State Administrative Agencies (SAAs): 
Alabama; 
Arizona; 
Arkansas; 
California; 
Colorado; 
Florida; 
Georgia; 
Idaho; 
Illinois; 
Iowa; 
Kentucky; 
Louisiana; 
Maine; 
Maryland; 
Michigan; 
Minnesota; 
Mississippi; 
Missouri; 
Nebraska; 
Nevada; 
New Jersey; 
New Mexico; 
New York; 
North Carolina; 
North Dakota; 
Oregon; 
Pennsylvania; 
Rhode Island; 
South Carolina; 
South Dakota; 
Tennessee; 
Texas; 
Utah; 
Virginia; 
Washington; 
West Virginia; 
Wisconsin. 

State Administrative Agencies (SAAs): 
Alaska; 
Connecticut; 
Delaware; 
District of Columbia; 
Hawaii; 
Indiana; 
Kansas; 
Massachusetts; 
Montana; 
New Hampshire; 
Ohio; 
Oklahoma; 
Vermont; 
Wyoming. 

Sources: HUD (data); Map Resources (map). GAO-14-410. 

[End of figure] 

Despite Declining Production, Manufactured Homes Remain an Affordable 
Housing Alternative in Some Regions: 

Annual shipment of new manufactured homes has declined substantially 
in recent years. According to the MHS, about 250,500 manufactured 
homes were shipped to retailers in the United States in 2000.[Footnote 
11] In 2012 the number of manufactured homes shipped fell to 54,900 
(see figure 5). According to the MHS, manufactured homes shipments 
increased to about 60,000 in 2013. 

Figure 5: Shipments of Manufactured Homes from 2000 to 2012: 

[Refer to PDF for image: line graph] 

Number of homes shipped: 

2000: 250,500; 
2001: 193,300; 
2002: 168,500; 
2003: 130,900; 
2004: 130,600; 
2005: 146,800; 
2006: 117,300; 
2007: 95,700; 
2008: 81,900; 
2009: 49,800; 
2010: 50,000; 
2011: 51,600; 
2012: 54,900. 

Source: GAO analysis of Manufactured Housing Survey data. GAO-14-410. 

[End of figure] 

Despite the decline in new shipments in past years, in 2013 
approximately 5.9 million HUD Code compliant manufactured homes were 
in use in the United States, accounting for 5.1 percent of total 
occupied housing units. However, the concentration of manufactured 
homes varies across regions. The southern United States, for instance, 
has the highest concentration, with manufactured homes making up 
approximately 8 percent of the region's total occupied homes (see 
figure 6). In addition, the majority of manufactured homes are located 
in non-metropolitan areas, in part because of land constraints or 
barriers such as zoning laws in metropolitan areas.[Footnote 12] 
According to data from the 2011 American Housing Survey (AHS), over 
half of manufactured homes (52.4 percent) were located in non-metro 
areas in that year, compared to about 25 percent of single family 
homes and 11 percent of rented apartments.[Footnote 13],[Footnote 14] 

Figure 6: Manufactured Homes as a Percentage of All Occupied Housing 
Units, by Region: 

[Refer to PDF for image: illustrated U.S. map] 

All regions: 6.3%; 
New England: 2.8%; 
Southeast: 9.5%; 
Midwest: 4.2%; 
West: 5.6%. 

Sources: GAO analysis of American Housing Survey data; Map Resources 
(map). GAO-14-410. 

Note: These figures refer to occupied manufactured homes built after 
1974. 

[End of figure] 

As with other single family homes, manufactured homes tend to be 
occupied by their owners rather than rented to others. In 2011, about 
81 percent of the manufactured homes built after 1975 in the U.S. were 
owner occupied, and 16 percent were rented for cash. In comparison, 
about 85 percent of all single family homes were owner occupied in 
2011 (see figure 7). 

Figure 7: Ownership Characteristics of Occupied Manufactured Homes and 
Single Family Homes, 2011: 

[Refer to PDF for image: 3 pie-charts] 

Manufactured homes: 
Occupied without payment of cash rent: 2.6%; 
Rented for cash payment: 16.2%; 
Owned or being bought: 81.2%. 

Single family site-built homes: 
Occupied without payment of cash rent: 1.8%; 
Rented for cash payment: 13.2%; 
Owned or being bought: 85.0%. 

One story, single family site-built homes: 
Occupied without payment of cash rent: 2.1%; 
Rented for cash payment: 18.4%; 
Owned or being bought: 79.5%. 

Source: GAO analysis of American Housing Survey data. GAO-14-410. 

Note: The term "single-family home" refers to single-family detached 
homes. 

[End of figure] 

Our analysis also showed that owners of manufactured homes tended to 
have lower incomes than other homeowners. In 2011, about 75 percent of 
owners of manufactured homes had household incomes of less than 
$50,000, compared with about 77 percent of apartment renters, about 41 
percent of owners of single family homes, and about 52 percent of 
owners of one story single family homes (see figure8). 

Figure 8: Income Characteristics of Owners of Occupied Manufactured 
and Single Family Site-Built Homes and Apartment Renters, 2011 (All 
Areas): 

[Refer to PDF for image: 4 pie-charts] 

Manufactured homeowners: 
Less than $50,000: 74.9%; 
$50,000 to $99,999: 21.0%; 
$100,000 or more: 4.1%. 

Apartment renters: 
Less than $50,000: 73.9%; 
$50,000 to $99,999: 19.9%; 
$100,000 or more: 6.3%. 

One story, single family site-built homeowners: 
Less than $50,000: 51.8%; 
$50,000 to $99,999: 31.8%; 
$100,000 or more: 16.4%. 

Single family site-built homeowners: 
Less than $50,000: 43.0%; 
$50,000 to $99,999: 32.3%; 
$100,000 or more: 24.8%. 

Source: GAO analysis of American Housing Survey data. GAO-14-410. 

[End of figure] 

Our analysis also showed similar income characteristics for 
manufactured home owners located in non-metropolitan areas. In 2011, 
about 76 percent of owners of manufactured homes had household incomes 
of less than $50,000, as compared with about 90 percent of apartment 
renters, 51 percent of owners of single family homes, and about 62 
percent of owners of one story single family homes (see figure 9). 

Figure 9: Income Characteristics of Owners of Occupied Manufactured 
and Single Family Site-Built Homes and Apartment Renters, 2011 (Non-
metro Areas): 

[Refer to PDF for image: 4 pie-charts] 

Manufactured homeowners: 
Less than $50,000: 75.8%; 
$50,000 to $99,999: 20.9%; 
$100,000 or more: 3.3%. 

Apartment renters: 
Less than $50,000: 82.3%; 
$50,000 to $99,999: 15.4%; 
$100,000 or more: 2.3%. 

One story, single family site-built homeowners: 
Less than $50,000: 61.9%; 
$50,000 to $99,999: 28.2%; 
$100,000 or more: 9.8%. 

Single family site-built homeowners: 
Less than $50,000: 54.4%; 
$50,000 to $99,999: 31.3%; 
$100,000 or more: 14.3%. 

Source: GAO analysis of American Housing Survey data. GAO-14-410. 

[End of figure] 

Our analysis of the 2012 MHS and 2011 AHS data also showed that 
manufactured homes were an affordable housing option in terms of their 
relatively low sales prices and monthly costs. In 2012, single-section 
manufactured homes were priced, on average, at $41,175 and multi-
section manufactured homes at $75,525[Footnote 15]. Manufacturers we 
interviewed said that these homes cost less to build than site-built 
homes, including modular homes, primarily because on-site construction 
and transportation costs for manufactured homes are less than those 
associated with modular homes and other site-built homes. Manufactured 
homes also typically had lower monthly costs, including loan payments, 
taxes, rent, utilities, and other fees, than site-built homes. 
[Footnote 16] 

In 2011, around 16 percent of owners of manufactured homes paid $1,000 
or more in monthly costs, compared with 55 percent of owners of single 
family site-built homes. Around 45 percent of manufactured home owners 
paid less than $500 in monthly costs, while 19 percent of owners of 
single family site-built homes paid less than $500 each month (see 
figure 10). Owners of manufactured homes also had lower monthly costs 
than renters. According to the AHS data, the median monthly cost of 
owning a manufactured home in 2011 was approximately $550, while the 
median monthly costs for apartment renters that same year were $800. 
[Footnote 17] 

Figure 10: Monthly Housing Costs for Owners of Occupied Manufactured 
Homes, Single Family Site-Built Homes and Apartment Renters 2011: 

[Refer to PDF for image: horizontal bar graph] 

Manufactured homes:
Less than $500 monthly housing costs: 44.5%; 
$1,000 or more monthly housing costs: 16%. 

Rented apartments: 
Less than $500 monthly housing costs: 23%; 
$1,000 or more monthly housing costs: 27.6%. 

Single family site-built homes: 
Less than $500 monthly housing costs: 18.9%; 
$1,000 or more monthly housing costs: 55.4%. 

One story, single family site-built homes: 
Less than $500 monthly housing costs: 26.9%; 
$1,000 or more monthly housing costs: 44.5%. 

Source: GAO analysis of American Housing Survey data. GAO-14-410. 

[End of figure] 

Although manufactured homes generally cost less to purchase than other 
homes and have lower monthly costs, owners of manufactured homes are 
more likely to have higher-priced financing than owners of site-built 
homes.[Footnote 18] According to 2012 HMDA data, manufactured home 
loans accounted for about 2.5 percent of all one-to-four family 
purchase loans.[Footnote 19] However, according to the HMDA data, they 
comprise 34 percent of all high-priced purchase loans. Moreover, 74 
percent of conventional purchase loans for manufactured homes were 
identified as high-priced loans, compared with 24 percent of purchase 
loans supported by FHA, the U.S. Department of Agriculture (USDA), and 
the Department of Veterans Affairs (VA).[Footnote 20] Private lenders, 
such as national consumer finance companies, also provide financing 
for purchasing manufactured homes. Loans generally take the form of 
home-only or chattel loans rather than real estate mortgages. 
According to some lenders we interviewed and one consumer 
organization, these loans typically have higher interest rates and 
shorter terms (15-20 years versus 30) than home mortgages. 

HUD Has Not Fully Achieved the Manufactured Housing Program's Key 
Purposes: 

HUD has encountered challenges in meeting key purposes of the 2000 
Act, as seen by, among other things, delays and backlogs in its 
rulemaking process, limited assessment of financing alternatives, and 
incomplete documentation of enforcement-related activities. The 
purposes of the 2000 Act include (1) establishing a consensus-based 
process to update and interpret manufactured housing safety and 
construction standards and regulations for enforcing them; (2) 
facilitating the availability of affordable manufactured housing; and 
(3) ensuring uniform and effective enforcement of manufactured housing 
standards and protecting consumers.[Footnote 21] More specifically, 
the 2000 Act requires HUD to establish the MHCC to submit proposed 
standards within each 2-year period from the time its members are 
appointed. The MHCC must submit the standards in the form of a 
proposed rule, and include an economic analysis, for each proposal. 
[Footnote 22] The Act also requires HUD to publish each set of 
proposals within 30 days of submittal and respond to each set within a 
1-year period. Further, it directs HUD to review the programs for FHA 
manufactured home loans, develop any changes that would promote the 
affordability of manufactured homes, and encourage the government-
sponsored enterprises (GSE) to develop and implement secondary market 
securitization programs for these loans. Finally, the Act requires 
that HUD ensure uniform and effective enforcement of the HUD Code. 

HUD Has a Process for Updating the HUD Code, but Has Not Resolved 
Delays Related to the Lack of Economic Analyses: 

HUD has met the requirements for the initial establishment of both the 
MHCC and a process for updating the HUD Code. In 2001, HUD entered 
into a contract with an administering organization for the MHCC and 
continued to work with the contractor through June 2013, when the 
contract expired. HUD rebid the contract in July 2013 but as of the 
release of this draft to HUD in May 2014 had not awarded the contract 
to a new administering organization.[Footnote 23] This organization is 
a private-sector standard-setting body with specific experience in 
developing building codes. It is responsible for managing the MHCC--
for example, recommending new members--and for administering the 
processes for developing new standards. As required by the Act, the 
MHCC consists of 21 members, who are all appointed volunteers. They 
represent three groups: producers and retailers, consumers, and 
general interest and public officers, including regulatory 
organizations. The administering organization first appointed members 
to the MHCC in August 2002. HUD last updated the roster of MHCC 
members in February 2013. 

HUD has also put in place a process for updating the standards. First, 
MHCC reviews proposals submitted by its members, HUD, or the public. 
As required by the Act, if two-thirds of the MHCC members approve a 
proposal, the committee finalizes it and recommends it to HUD in the 
form of a proposed rule with an economic analysis. HUD is required to 
publish the proposed rule within 30 days of receiving the MHCC's 
proposals. According to HUD officials, if the MHCC does not prepare a 
proposed rule with an economic analysis, HUD develops the proposed 
rule and the economic analysis. After this step, the proposal follows 
the typical rulemaking process, including an Office of Management and 
Budget (OMB) review, publication in the Federal Register, and a public 
comment period. After reviewing the public comments and possibly 
revising the recommendations, HUD adopts, modifies, or rejects the 
recommendation and publishes the decisions in a Final Rule (see figure 
11).[Footnote 24] HUD also submits the rule to its congressional 
authorizing committees for 15 days before publication of the proposed 
rules. 

Figure 11: HUD's Process for Updating the Manufactured Housing Safety 
and Construction Standards (HUD Code): 

[Refer to PDF for image: process illustration] 

Initial development: 

1. Manufactured Housing Consensus Committee (MHCC) considers proposals 
to revise standards: 
HUD proposals; 
Public proposals; 
MHCC's proposals. 

2. Proposals receiving votes of at least two-thirds of MHCC members 
are approved as recommendations. MHCC finalizes approved 
recommendations and submits them to HUD. 

Draft and review: 

3. HUD prepares both the economic analysis and the proposed rule of 
recommendations if not done by MHCC. 

4. Proposed rule goes through HUD internal clearance process. 

5. Office of Management and Budget (OMB) reviews draft proposed 
rulemaking. 

6. HUD publishes recommendations in Federal Register as proposed 
rulemaking and opens the rule for public comments. 

7. Public comments are submitted to HUD. 

8. HUD reviews public comments and prepares a response to comments. 

9. MHCC may provide HUD Secretary with revised recommendations. 

Finalize and publish: 

10. HUD Secretary adopts, modifies, and rejects recommendations. 

11. Rejected recommendation: HUD publishes notice with reasons 
for rejection in the Federal Register; 

or: 

11. Adopted or modified recommendation. 

12. HUD drafts final rule. 

13. Draft final rule goes through HUD internal clearance process. 

14. OMB reviews the draft final rule. 

15. HUD addresses any OMB concerns and publishes the final rule in the 
Federal Register. 

Source: GAO analysis of HUD information. GAO-14-410. 

Note: The MHCC is an advisory committee established by Congress to 
provide recommendations to HUD on standards and monitoring of 
standards for manufactured housing. 

[End of figure] 

For the most part, the MHCC has met the requirements for submitting 
proposed standards within each 2-year period.[Footnote 25] The MHCC 
last submitted recommendations for changes in the standards in January 
2012 and January 2013, when it recommended approval of 9 proposals. 
However, HUD officials stated that because the former administering 
organization did not formally submit these last 9 proposed MHCC 
recommendations from January 2012 and January 2013, the agency will 
not begin to consider them until it receives them from a new 
administering organization. We found that from its inception in 2003 
to January 2013, the committee submitted 174 recommendations.[Footnote 
26] 

As we have seen, the 2000 Act requires that not later than 12 months 
after receiving a MHCC recommendation to the HUD Code, HUD must either 
adopt and publish the recommendation as a final rule, reject the 
recommendation and publish the reasons for the rejection, or publish a 
modified version and provide for a comment period. However, we 
observed that HUD had not accepted, rejected, or modified any of the 
MHCC recommendations for updating the HUD Code within 1 year of their 
submission. According to HUD officials, the relevant procedural 
requirements and timelines for acting on MHCC's recommendations were 
not triggered because the MHCC did not submit the recommendations in 
the form of proposed rules that included relevant economic analyses, 
as required by the 2000 Act. HUD officials said that the administering 
organization was responsible for providing technical support to the 
MHCC in developing proposed rules and economic analyses. For example, 
the contract for fiscal year 2013 required the administering 
organization to ensure the availability of subject-matter expertise 
necessary to support the satisfactory performance of the MHCC, 
including activities related to the federal rulemaking process. 
However, one official from the former administering organization told 
us that both it and the MHCC lacked the expertise and resources to 
draft proposed rules and conduct economic analyses. HUD and the 
administering organization have acknowledged that the MHCC does not 
have the expertise or resources to conduct economic analyses.[Footnote 
27] According to HUD officials, because the MHCC and the administering 
organization had not been able to develop proposed rules with adequate 
economic analyses, none of the submissions from the MHCC had been 
complete, and the 1-year statutory requirement for adopting, 
modifying, or rejecting MHCC proposals has never been triggered. 

HUD officials also said that because of the lack of adequate proposed 
rules with economic analyses from the MHCC or its administrative 
agent, HUD staff have developed rules and done the analyses, delaying 
the rulemaking process. In fact, HUD's revisions to the Code have 
taken substantially longer than the timeframes specified in the 2000 
Act. HUD has updated the Code twice (in 2005 and 2013). According to 
HUD officials, in November 2005 (in its first update of the Code), HUD 
published a final rule in the Federal Register that contained 36 MHCC 
recommendations submitted in February 2003 and July 2004, most of 
which were adopted without any further modifications by it. The second 
update of the Code consisted of 49 recommendations also proposed by 
MHCC in 2003. While at least some of these recommendations were the 
subject of further discussions between HUD and MHCC, HUD did not 
publish a proposed rule in the Federal Register containing these 
recommendations until July 2010 and did not publish a final rule until 
December 2013. As of May 2014, HUD was still considering 35 
recommendations that the MHCC submitted in 2009 and 2010. As stated 
earlier, according to HUD officials, because the administering 
organization did not formally submit an additional 9 recommendations 
in 2012 and 2013, HUD will not consider these recommendations until it 
receives them from a new administering organization (see figure 12 for 
a depiction of the timelines for five examples of manufactured housing 
construction and safety standards for which HUD had completed final 
rules). 

Figure 12: Selected MHCC Recommendations and HUD Updates to the HUD 
Code, 2003-2014: 

[Refer to PDF for image: illustrated timeline] 

Water closets: 
Date of MHCC ballot: Early 2003; 
Date of HUD proposed rule: Late 2004; 
Date of HUD final rule: Late 2005; 
One year after MHCC ballot: Early 2004. 

Whole-house ventilation: 
Date of MHCC ballot: Early 2003; 
Date of HUD proposed rule: Late 2004; 
Date of HUD final rule: Late 2005; 
One year after MHCC ballot: Early 2004. 

Electrical code updates: 
Date of MHCC ballot: Mid-2004
Date of HUD proposed rule: Late 2004; 
Date of HUD final rule: Late 2005; 
One year after MHCC ballot: Mid-2005. 

Stainless steel tubing: 
Date of MHCC ballot: Early 2003; 
Date of HUD proposed rule: Mid-2010; 
Date of HUD final rule: Late 2013; 
One year after MHCC ballot: Early 2004. 

Anti-scalding devices: 
Date of MHCC ballot: Early 2003; 
Date of HUD proposed rule: Mid-2010; 
Date of HUD final rule: Late 2013; 
One year after MHCC ballot: Early 2004. 

Source: GAO. GAO-14-410. 

Note: For the purposes of this analysis, we considered a standard to 
be initiated on the date the MHCC approved it in a ballot from 2003 to 
2013. We considered a standard to be finalized on the date it was 
published in the Federal Register as a final rule. 

[End of figure] 

According to HUD officials, this additional workload posed by the 
tasks of developing proposed rules and economic analyses has further 
strained existing staff resources. Further, HUD officials voiced 
concerns over other administrative and legislative impediments to 
producing more timely updates to the HUD Code. These include the Act's 
requirement that HUD publish a proposed rule within 30 days of 
receiving the MHCC's recommendations, the requirement for a 15 day pre-
publication review by Congress, a 30-60 day public comment period, as 
well as allowing sufficient time for other administrative reviews, 
including review by OMB. HUD requested increased staffing for fiscal 
year 2005 to better meet the 1-year requirement for updating the 
standards, but staff levels have not increased. Also, the position of 
Administrator of the Office of Manufactured Housing Programs remained 
vacant from 2010 until March 2014.[Footnote 28] Other than the earlier 
attempt at increasing staff levels, and facing ongoing challenges, HUD 
has no plan for ensuring more timely updates to the construction and 
safety standards. Standards for internal control emphasize the need 
for federal agencies to establish plans to help ensure goals and 
objectives can be met, including compliance with applicable laws and 
regulations.[Footnote 29] 

As we previously found, the lack of updates to the HUD Code has 
delayed implementation of important safety devices, reducing the 
effectiveness of the standards and, over time, creating discrepancies 
between the HUD Code and other commonly accepted residential building 
standards, which are updated every 3 years.[Footnote 30] For example, 
the pending recommendations include requirements for carbon monoxide 
detectors, which are now incorporated in industry standards. 

Safety concerns have led some states and localities to begin requiring 
certain safety features for homes in their jurisdictions. For 
instance, Pennsylvania state officials told us that at least one 
locality required that manufactured homes have anti-scalding devices 
in showers before the HUD Code included them in December 2013. The HUD 
Code did not address this area of performance and therefore, according 
to HUD, a jurisdiction could have imposed such a requirement without 
conflicting with the preemptive HUD Code. However, the costs to 
purchasers of a manufactured home could be significant if the 
manufacturer had not already installed such a device. That is, a 
homeowner might be required by the locality to install such devices at 
a cost of hundreds of dollars. Further, according to officials from 
the State of Pennsylvania, this modification of the homes' plumbing 
might void the manufacturers' plumbing warranty. As mentioned earlier, 
the MHCC recommended anti-scalding devices in February 2003 and the 
HUD Code will require these devices beginning in June 2014. 

Several states, including California, Minnesota, and Maryland, require 
carbon monoxide detectors, which are not addressed by the HUD 
Code.[Footnote 31] The IRC and the American Society of Heating, 
Refrigerating, and Air-Conditioning Engineers have required carbon 
monoxide detectors for all residential site-built and modular homes 
since 2009 and 2010, respectively. While the MHCC recommended in 2009 
that this standard be required for all new manufactured homes, HUD has 
not yet adopted this proposal. According to HUD officials, as of May 
2014 HUD is considering the proposal to require carbon monoxide 
detectors. Until HUD works its way through its backlog of proposals, 
purchasers of manufactured homes could face increased costs and, in 
some cases, potential safety hazards. 

HUD Has Done Little to Assess How Federal Loan Programs Could Improve 
the Affordability of Manufactured Homes: 

HUD offers two loan insurance programs that provide financing for 
manufactured homes, FHA Title I and Title II. Both programs are 
intended to insure lenders against losses in the event of a default. 
Homebuyers and homeowners may finance the purchase of or refinance 
their manufactured home, lot, or both through the FHA Title I program, 
which insures both chattel and mortgage loans. Manufactured homes 
titled as personal property are financed through chattel loans and 
would be eligible for Title I. Home buyers and homeowners may also 
finance the purchase or refinancing of their home through the Title II 
program, which insures mortgages for all types of single family homes, 
including manufactured homes that are classified as real estate. 
Manufactured homes titled as real estate and installed on a permanent 
foundation would be eligible for Title II. 

Considering both its Title I and Title II loan programs, FHA plays a 
smaller role in the financing of manufactured homes than in the 
financing of other single family homes, according to HMDA data. 
Specifically, 2012 HMDA data, which include both chattel and real 
property manufactured housing loans, showed that FHA programs made up 
17.5 percent of all loans for the purchase of manufactured homes, but 
27 percent of loans for the purchase of one-to-four family homes. 
Although the Title I program is intended in part to serve the needs of 
the manufactured housing market, owners of manufactured homes use it 
less often than Title II.[Footnote 32] In 2012, FHA insured a total of 
654 Title I manufactured home loans and 12,301 Title II manufactured 
home loans.[Footnote 33] According to data from the MHS, in that same 
year nearly 41,000 newly placed manufactured homes were titled as 
personal property, while 8,000 newly placed manufactured homes were 
titled as real estate.[Footnote 34] FHA officials stated that they 
were not aware of specific barriers that consumers faced in obtaining 
Title I loans, but noted that two nationwide lenders participated in 
the program. Ginnie Mae securitizes FHA Title I manufactured home 
loans and works with these lenders.[Footnote 35] One Ginnie Mae 
official explained that although the agency had experienced losses 
from manufactured housing products in the past, the agency had 
conducted ongoing outreach with lenders to increase participation in 
the Ginnie Mae program.[Footnote 36] FHA arranged a meeting between 
Ginnie Mae officials and several manufactured housing stakeholders to 
discuss requirements for participating in the Ginnie Mae program. 
Industry representatives requested less stringent eligibility criteria 
for those wanting to issue Ginnie Mae-guaranteed securities backed by 
Title I loans. At present, Ginnie Mae requires that such issuers have 
a minimum net worth of $10,000,000. In contrast, issuers of securities 
backed by Title II mortgages must have a minimum net worth of 
$2,500,000. According to one HUD official, issuers of securities 
backed by Title I loans bore greater risk that necessitated the higher 
net worth requirement. A number of factors contribute to the increased 
risk, including higher losses because of greater frequency of default 
and lower insurance coverage.[Footnote 37] According to one Ginnie Mae 
official, Ginnie Mae had invited the industry to provide additional 
data to demonstrate the performance of their manufactured home loans, 
but had yet to receive a response. According to a Ginnie Mae official, 
it has continued to engage with lenders and industry representatives, 
but have so far received no data demonstrating the performance of 
these loans. 

Further, Fannie Mae and Freddie Mac, which guarantee and purchase 
loans from mortgage lenders, play less of a role in providing 
liquidity to lenders of manufactured home loans than they do in 
providing liquidity to lenders of loans on other single family 
properties. HMDA data indicated that of conventional loans for 
manufactured homes, 7 percent were sold to Fannie Mae and Freddie Mac, 
compared to 41 percent of conventional loans for site-built homes. One 
lender of manufactured home loans cited certain underwriting 
constraints that limited their participation in Fannie Mae and Freddie 
Mac programs. For example, Fannie Mae requires an appraisal of the 
manufactured home with comparable local manufactured homes titled as 
real estate, a requirement that can be challenging, particularly in 
rural areas with relatively few homes and where many manufactured 
homes are titled as personal property. Fannie Mae and Freddie Mac do 
not purchase loans for manufactured homes titled as personal property. 

Because of these constraints, most financing for manufactured homes, 
whether chattel or real property, is provided through private lenders. 
According to industry representatives and one lender, lenders often 
hold these loans in their portfolios and do not sell them on the 
secondary market. Some lenders we spoke with indicated that they 
declined to work with the FHA loan products because of the 
administrative burden. These lenders also stated that they believed 
Fannie Mae and Freddie Mac should buy chattel loans in addition to 
real estate loans. According to testimony given by the Manufactured 
Housing Institute during a House of Representatives field hearing on 
November 29, 2011, the lack of a viable secondary market for 
manufactured home loans has led to higher financing costs.[Footnote 
38] The institute noted that the lack of liquidity in the manufactured 
housing market restricted buyers' access to low-cost loans and that 
the available loans sometimes carried higher interest rates than loans 
for site-built homes. As stated previously, loans for manufactured 
homes are more likely to be higher priced than loans for site-built 
homes. Although some of these differences may be due to differences in 
credit strength, the generally higher interest rate associated with 
financing a manufactured home diminishes, in part, because of some of 
the affordability benefits that we discussed earlier.[Footnote 39] 

Recognizing the impact that a lack of low-cost financing could have on 
the affordability of manufactured homes, Congress directed HUD in the 
2000 Act to review the FHA programs for manufactured home 
loans.[Footnote 40] The Act required that HUD develop any changes in, 
among other things, loan terms, amortization periods, regulations, and 
procedures that might promote the affordability of manufactured homes. 
However, HUD has not yet examined or researched the effectiveness of 
these loan programs because its research has focused on other 
priorities. HUD's most recent study on manufactured housing focused on 
state and local regulatory barriers to placing manufactured homes in 
urban communities.[Footnote 41] Other research that PD&R has 
coordinated includes aspects of manufactured housing as they relate to 
energy efficiency and the environment.[Footnote 42] PD&R's Research 
Roadmap for fiscal years 2014 through 2018 proposed researching the 
manufactured housing market and the effect of financing on 
manufactured housing demand. However, HUD did not select this proposal 
for its fiscal year 2015 Budget Request and, according to one HUD 
official, it was not among the highest priorities. 

Such research could help HUD to understand the effectiveness of its 
programs in facilitating the affordability of manufactured homes. For 
example, data from the Rural Housing Services (RHS) program show that 
guaranteed loans on manufactured homes with permanent foundations 
perform worse than all RHS single family guaranteed loans.[Footnote 
43] However, this analysis did not control for other factors that 
might explain these differences, such as borrower and property 
characteristics. FHA collects such data, which should permit a more 
rigorous analysis of loan performance. Further, FHA officials stated 
that they evaluate Title I manufactured housing loan performance and 
the Title I insurance fund to ensure that premiums are sufficient to 
cover program expenses, as required by the Housing Economic Recovery 
Act 2008 (HERA).[Footnote 44] However, FHA has not analyzed the 
performance of Title I and Title II manufactured housing loans to 
understand the different participation levels in the programs and 
lacks a plan for doing so. As noted earlier, standards for internal 
control emphasize the need for federal agencies to establish plans to 
help ensure goals and objectives can be met, including compliance with 
applicable laws and regulations.[Footnote 45] Such research could 
further HUD's understanding of the relationship between loan 
performance and property type, providing information that it could 
potentially use to encourage lenders to participate in the federal 
program. 

The Act also requires HUD to conduct research and make other efforts 
to encourage the enterprises and Ginnie Mae to actively develop and 
implement secondary market securitization programs for federally 
insured loans for manufactured homes, as well as those of other loan 
programs, in order to promote the availability of affordable 
manufactured homes. As we have seen, industry officials have cited the 
lack of a viable secondary market for manufactured housing loans as a 
factor in higher financing costs, especially for chattel loans. 
However, HUD was unable to identify any efforts, other than the 
discussions with Ginnie Mae, which it had undertaken to encourage the 
enterprise to do more to help securitize additional manufactured home 
loans. A Ginnie Mae official pointed to their prior experience in 
working with issuers of securities backed by manufactured home loans 
insured under the FHA Title I program. Specifically, he cited 
experience with lenders that were unable to fulfill their commitments, 
requiring Ginnie Mae to pick up servicing of their portfolios. The 
official also noted that lenders might not want to securitize their 
loans through Ginnie Mae because they had other sources of funding and 
wished to keep these loans in their portfolio. The official noted that 
one of the largest such lenders met the net worth requirement for 
Ginnie Mae and was an approved issuer of Ginnie Mae securities backed 
by Title I loans. Nonetheless, it is not clear that HUD has conducted 
research and other efforts to encourage the enterprises and Ginnie Mae 
to actively develop and implement secondary market securitization 
programs for FHA manufactured home loans or loans guaranteed by other 
federal programs. 

Further, it remains uncertain that the enterprises would enter the 
market for securitizing loans on manufactured homes that are titled as 
personal property. Under HERA, which resulted in the enterprises being 
placed under conservatorship by the Federal Home Finance 
Administration (FHFA), Congress also directed the enterprises to serve 
specified underserved markets, including manufactured housing. HERA 
provided that in determining whether the enterprises had adequately 
served the manufactured housing market, FHFA could consider loans 
secured by both real and personal property. However, in 2010 FHFA 
published a proposed rule that would establish a method for evaluating 
and rating the Fannie Mae and Freddie Mac's performance in underserved 
markets. The proposed rule also excluded loans for manufactured homes 
titled as personal property from consideration for securitization 
because, as FHFA stated, these loans would require substantial efforts 
by the Fannie Mae and Freddie Mac "to ensure safe and sound operations 
and sustainable homeownership for families." 

HUD Cannot Consistently Demonstrate That Issues from Inspection 
Monitoring Activities and Complaints Are Being Resolved: 

Another purpose of the 2000 Act is to help ensure uniform and 
effective enforcement of federal construction and safety standards for 
manufactured homes. To do this, HUD uses a monitoring contractor that 
reviews the activities of organizations that inspect manufactured home 
design and production activities. However, HUD could not demonstrate 
that it has consistently taken actions in response to the monitoring 
contractor's "Recommendations for HUD Follow-Up." These 
recommendations highlighted items that HUD should follow-up on based 
on the contractor's review of IPIA and DAPIA inspections in 
manufacturing plants. For example, in some cases the HUD monitoring 
contractor noted that an IPIA was not performing inspections as 
required in certain plants and recommended that HUD take action to 
ensure that the appropriate corrective measures had been taken. HUD 
officials maintained that they did conduct follow up actions such as 
phone calls and provided us with emails showing follow-up on some of 
the findings we inquired about, but did not provide documentation 
showing that the agency consistently acted on all the monitoring 
contractor's findings or the outcome of follow-up actions taken. HUD 
officials also said that they had not been able to devote further 
attention to monitoring and following up on findings from the 
monitoring contractor because of resource issues and time limitations. 
Standards for federal internal controls suggest that, among other 
things, monitoring activities should assess the quality of performance 
over time and ensure that the findings of audits and other reviews are 
promptly resolved.[Footnote 46] Without consistent documentation of 
the outcome of these follow-up efforts, HUD has limited assurance that 
issues identified during the enforcement process are being resolved 
and that federal construction and safety standards for manufactured 
homes are uniformly and effectively applied. 

HUD acknowledged that the monitoring contractor did not provide a 
deliverable from a recently completed monitoring contract period (July 
2011 through July 2012). The missing item was a transition plan that 
would have documented activities tied to the monitoring contract in 
the event that HUD decided to assume the activities in the contract or 
hire a new contractor. The transition plan was intended to provide a 
plan for transferring all data and property associated with the 
contract to the government and/or a new contractor should HUD decide 
to assume the activities of the contract or transfer them to another 
contractor. Such information could aid HUD in exploring other options 
for conducting the work called for in the monitoring contract. 
Overall, such a condition raises questions and uncertainties about 
HUD's oversight of its monitoring contract as well as whether the data 
that were not delivered in a transition plan represents significant 
noncompliance under the contract. Among other things, the Federal 
Acquisition Regulations (FAR) state that contracting offices are 
responsible for ensuring that nonconformances are identified, and 
establishing the significance of a nonconformance when considering the 
acceptability of supplies or services which do not meet contract 
requirements.[Footnote 47],[Footnote 48] 

HUD also oversees a complaint process that is intended to help with 
the goal of ensuring uniform application of manufactured housing 
standards. In part, HUD relies upon the 37 state administrative 
agencies (SAA) that respond to consumer complaints and periodically 
review manufacturer facilities. However, HUD did little to assess the 
content of complaints. For example, HUD does not maintain a 
consolidated complaint log to evaluate in a systematic fashion the 
nature and resolution of complaints involving manufactured housing, or 
the entities involved. HUD's website directs consumers to individual 
SAAs where they may file complaints. There are 13 states where no SAA 
exists, thus making HUD the primary focal point for complaints in 
those states. However, even for the complaints it does receive, HUD 
does not maintain a consolidated complaint log or record to identify 
their extent and nature. The complaint process has the potential to 
play an important role in quantifying the extent of complaints tied to 
homes built under the HUD Code, understanding the nature of 
complaints, and ensuring that the safety standards are followed. 
Standards for federal internal controls suggest that organizations, 
among other things, establish monitoring activities to assess the 
quality of performance over time, including identifying and correcting 
deficiencies within established time frames, which a comprehensive 
complaint system would help accomplish.[Footnote 49] 

Looking ahead, we also noted that on-site construction activities pose 
new challenges for HUD's inspection efforts on manufactured homes. 
HUD's testing and inspection activities of manufactured homes are 
focused within the plant itself. However, some construction activities 
occur on-site. One of the most common building layouts to surface over 
time has been the construction of manufactured homes in two or more 
factory-built units, or sections (see figure 13). For example, a 
manufactured home may consist of two complete sections that are joined 
together on-site to create a multi-section manufactured home. 
Consequently, other construction activities, such as the completion of 
siding and joining roofs, are occurring on-site, outside of the 
factory. 

Figure 13: Examples of Multi-section Manufactured Homes Joined On-site: 

[Refer to PDF for image: 2 photographs] 

Example from Frontier Housing; 
Example from Noji Gardens. 

Source: Frontier Housing and Homesite. GAO-14-410. 

[End of figure] 

Other common construction methods--for example, adding a hinged roof 
to enhance the look of the home,[Footnote 50] or upgrading the energy 
efficiency of the home, also require construction and inspection 
activities on-site.[Footnote 51] However, HUD, through its monitoring 
contractor and IPIA entities, continues to focus almost exclusively on 
in-plant testing and inspections. For instance, HUD has developed in-
plant inspection checklists for IPIA inspection entities to follow to 
help ensure compliance with the HUD Code while a unit is being 
constructed in the factory, but is still working on implementing more 
robust inspection processes for on-site construction activities. 
[Footnote 52] As homes are further customized, some variations, such 
as many hinged-roof designs, are categorized as alternative 
construction, requiring an on-site inspection, while other activities 
completed on-site are not currently subject to additional testing and 
inspection. HUD's inspection checklists do not require testing of some 
key systems completed on-site or IPIA inspections of all units on-
site. For instance, testing to validate the air-tightness of the home 
and performance of the ventilation system is required to receive an 
Energy Star certification during construction. However, the HUD Code 
cannot be used for such a certification because such testing is not 
currently required on-site once two sections of a multi-section HUD 
manufactured home are joined on-site.[Footnote 53] As on-site 
construction activities increase, HUD will continue to face challenges 
ensuring the inspection regime for manufactured homes keeps pace with 
and addresses such trends in construction methods. 

Furthermore, as we have noted in previous work, HUD's testing and 
inspection efforts to validate the quality of construction are also 
specified in the HUD Code.[Footnote 54] Consequently, any updates to 
specifications on testing methods for key components of the house 
require updates to the HUD Code itself. However, as discussed earlier, 
HUD has faced delays in updating the HUD Code. For instance, the Code 
specifies the test for the pressure that the roof is supposed to be 
able to withstand. However, as we found in our past report, some 
performance standards that are called for in the HUD Code, such as 
those pertaining to whole-house ventilation, are not currently being 
tested. Accordingly, we recommended that test methods be developed for 
the ventilation system, to help ensure proper indoor air quality, 
which requires an update to the HUD Code. HUD generally agreed with 
this recommendation and said that it has been referred to the MHCC for 
consideration. 

Current Funds Collected from HUD Label Fees Are Insufficient to Fund 
the Manufactured Housing Program: 

Label Fees Are the Primary Funding Source for the HUD Manufactured 
Housing Program: 

HUD is authorized to collect fees from builders of manufactured homes 
to offset the expenses it incurs in carrying out its responsibilities 
under the Manufactured Housing Program.[Footnote 55] HUD currently 
assesses a $39 label certification fee per transportable manufactured 
housing unit produced by manufacturers. HUD set the level of the label 
certification fee in 2002 and has not increased it, although declining 
sales of manufactured homes mean that fee collections no longer cover 
the program's annual costs. Under the 2000 Act, all HUD label 
certification fee collections from HUD transportable units are 
deposited into the Manufactured Housing Fees Trust Fund and are 
available for use to the extent provided in annual appropriations 
acts.[Footnote 56] The 2000 Act also stipulated that the amount HUD 
charges for label fees may only be modified as specifically authorized 
in advance in an annual appropriations act and pursuant to a 
rulemaking.[Footnote 57] 

In addition, the 2000 Act specifies the activities for which the 
Office of Manufactured Housing Programs may use the funds appropriated 
from the Manufactured Housing Fees Trust Fund.[Footnote 58] HUD can 
use the label fees to cover contractual costs, carry out inspections, 
or monitor aspects of the program in the 13 states and the District of 
Columbia that do not have SAAs. HUD can also use them to pay the 37 
SAAs that enforce the HUD Code and handle consumer complaint 
activities on HUD's behalf to offset the costs they incur. Fees and 
appropriations from the general fund are held in the Manufactured 
Housing Fees Trust Fund. The Fund may have reserves that are carried 
over from one fiscal year to the next, helping the Office of 
Manufactured Housing Programs make payments at the beginning of each 
fiscal year. 

Since Fiscal Year 2009 Manufactured Housing Program Obligations Have 
Been Greater Than Revenue from HUD Label Fees: 

As the production and sale of manufactured homes generally declined 
after 2002, revenue collections from HUD certification label fees also 
fell, dropping to historically low levels in 2011. As we have seen, 
sales of transportable units fell from approximately 325,000 in fiscal 
year 2002 to around 90,000 in fiscal year 2013. This decline in sales, 
reflecting a decline in production, in turn, significantly reduced 
HUD's revenue from label fees, which fell from around $12,000,000 in 
2002 to less than $3,000,000 by 2011 (see figure 14).[Footnote 59] 

Figure 14: HUD Label Revenues and HUD Units Sold from Fiscal Years 
2002 to 2013: 

[Refer to PDF for image: 2 line graph] 

HUD label revenue: 

2000: $18.66 million; 
2001: $13.26 million; 
2002: $12.7 million; 
2003: $9.83 million; 
2004: $9.03 million; 
2005: $9.26 million; 
2006: $9.22 million; 
2007: $6.55 million; 
2008: $5.79 million; 
2009: $3.47 million; 
2010: $3.3 million; 
2011: $2.87 million; 
2012: $3.36 million; 
2013: $3.51 million. 

HUD transportable units sold: 

2000: 478,376; 
2001: 340,031; 
2002: 325,569; 
2003: 252,127; 
2004: 231,421; 
2005: 237,520; 
2006: 236,397; 
2007: 167,986; 
2008: 148,389; 
2009: 88,967; 
2010: 84,559; 
2011: 73,697; 
2012: 86,245; 
2013: 90,094. 

Source: GAO analysis of HUD data. GAO-14-410. 

[End of figure] 

At the same time, obligations for the Manufactured Housing Program 
have increased. According to HUD, until 2009, the number of 
manufactured homes built and sold generated enough in label fee 
revenue to cover the costs of the HUD Manufactured Housing Program. 
Beginning in fiscal year 2009, however, the revenue that label fees 
generated was insufficient to cover the program's obligations. 
According to data that HUD officials provided to us, the Manufactured 
Housing Program's obligations were $6.62 million in 2009, when HUD 
generated $3.3 million in label fees. In each of the following years, 
HUD generated less revenue in label fees than it incurred in 
obligations. For the most recently completed fiscal year, fiscal year 
2013, HUD had $10.1 million in obligations, while generating only $3.5 
million in label fees. For fiscal year 2014, HUD estimates that 
program obligations will total roughly $10.0 million but the program 
will only collect $6.53 million in label fees.[Footnote 60] 

According to officials, these obligations include expenses associated 
with office staff and program administration (including payments to 
SAAs), as well as costs related to MHCC activities--monitoring 
contractors, administration, and planning meetings. The officials said 
that payments to SAAs were a major programmatic cost and noted that 
the payments made to each SAA varied from year to year, depending on 
the activities the states undertook. For fiscal year 2014, HUD 
projected that the costs of annual SAA payments and the contract for 
monitoring inspection agencies of the Office of Manufactured Housing 
would total $7.3 million, or 73 percent of the program's projected 
obligations. HUD officials noted that in recent years SAAs had been 
taking a more active role in HUD Code monitoring and enforcement and, 
as a result, HUD's payments to them and the monitoring contractor had 
increased. 

In order to meet its increasing budget obligations, the program has 
relied on congressional appropriations from the U.S. Department of 
Treasury's general fund. From 2009 through 2013, the program took in 
approximately $16.1 million in label fees and had programmatic 
obligations of around $38.3 million. During this same period, the 
program received $22.2 million in congressional general fund 
appropriations to make up the gap between its program costs and label 
fee revenue. Furthermore, the program's year-end carryover balances in 
recent years have been higher as a direct result of general fund 
appropriations that are available until expended (see figure 15). 
[Footnote 61] 

Figure 15: General Fund Appropriations and Carryover Balances for the 
HUD Office of Manufactured Housing Programs from Fiscal Years 2009 to 
2013: 

[Refer to PDF for image: 2 vertical bar graphs] 

Appropriations: 
2009: $5.4 million; 
2010: $8.9 million; 
2011: $8.8 million; 
2012: $2.5 million; 
2013: $2.4 million. 

End of year carryover balances: 
2009: $2.5 million; 
2010: $3.4 million; 
2011: $6.8 million; 
2012: $14.6 million; 
2013: $10.8 million. 

Source: GAO analysis. GAO-14-410. 

[End of figure] 

HUD User Fee Analysis: 

In fiscal year 2014, HUD's budget justification called for a total of 
$7.53 million in budget authority, including up to $6.53 million in 
estimated label fees and $1 million in general fund appropriations. In 
its fiscal year 2014 budget justification, the agency projected that 
the number of transportable units for which label fees are paid was 
not expected to significantly increase, and proposed an increase to 
the certification label fee of up to $100 in order to increase label 
fee revenue. 

HUD's budget justification for fiscal year 2015 also calls for an 
increase in label fees from $39 to $100. HUD's Office of Manufactured 
Housing Programs currently projects a gradual increase in 
transportable unit sales through the end of fiscal year 2015 and 
estimates that fee collections in 2015 will be approximately $10 
million dollars. The agency also stated in its 2015 congressional 
budget justification that its projected label fee revenue, combined 
with small amounts of unobligated balances from prior years, would be 
sufficient to fully fund the program's operating requirements in 2015. 

The HUD Office of Manufactured Housing Programs has stated its intent 
to raise label fees in previous HUD budget justifications dating back 
to fiscal 2009 and, as a result, had anticipated higher label fee 
collections in previous years.[Footnote 62] However, total user fee 
collections have fallen short of projections of the Office of 
Manufactured Housing Programs because it did not raise its label fees 
or seek other additional user fee income (see figure 16).[Footnote 63] 

Figure 16: Collected User Fees and Anticipated User Fees from Fiscal 
Years 2009 to 2013: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2009; 
Collected label fees: $3.5 million; 
Anticipated label fees: $10.6 million. 

Fiscal year: 2010; 
Collected label fees: $3.3 million; 
Anticipated label fees: $7 million. 

Fiscal year: 2011; 
Collected label fees: $2.9 million; 
Anticipated label fees: $7 million. 

Fiscal year: 2012; 
Collected label fees: $3.4 million; 
Anticipated label fees: $4 million. 

Fiscal year: 2013; 
Collected label fees: $3.5 million; 
Anticipated label fees: $4 million. 

Source: GAO analysis of HUD data. GAO-14-410. 

Note: HUD did not propose a label fee increase for 2013. 

[End of figure] 

Despite its stated intent for several years to raise label fees, HUD 
did not take the necessary actions to implement these label fee 
increases. Standards for federal internal controls suggest that 
organizations, among other things, establish plans to achieve their 
objectives, including effective and efficient operations using the 
entity's resources.[Footnote 64] Manufactured Housing Program 
officials stated that at the end of 2013 they had begun working with 
HUD's Office of General Counsel on a proposed rule designed to raise 
label fees. At present, HUD officials stated their intent to have a 
final rule permitting this label fee increase ready to be implemented 
at the end of 2014. However, as of April 2014, the agency had not 
issued any notices of proposed rules regarding label fee increases. 
[Footnote 65] 

Since fiscal year 2009, HUD has proposed increases to the label 
certification fee in all but one of its congressional budget 
justifications. The Chief Financial Officers (CFO) Act and OMB 
Circular A-25 provide for biennial fee reviews that include 
recommendations about adjustments to fees, as appropriate. While HUD 
Manufactured Housing Program officials told us that they have not 
conducted any such biennial reviews of their HUD label fees, program 
officials told us they have completed analysis of label fees in 
previous years. The label fee analysis that HUD officials provided to 
GAO was based on manufactured home production estimates, the amount of 
direct appropriations the program receives, the amount of carryover 
the program has from the previous year, and the anticipated program 
office activity and expense levels for the upcoming year. 

We previously concluded that whether fee rates are set by the agency 
in regulation or by Congress in statute, agencies must substantively 
review and report on all cost-based fees regularly to better ensure 
decision makers have complete information about program costs and 
activities.[Footnote 66] Agencies should provide program information 
to agencies, stakeholders, and Congress. These reviews can improve 
transparency, help ensure that fees remain aligned with program costs 
and activities, increase awareness of the costs of the federal 
program, and therefore increase incentives to reduce costs where 
possible. We previously found that user fee design and review should 
address how the user fees will be linked to a program's fixed and 
variable costs and whether or not user fees are set at a rate that 
enables the program to respond to spikes and surges in demand for the 
good or service upon which they are collected. Agencies should also 
seek to identify which factors drive fee revenue instability, and 
whether or not a particular program has other sources of funding which 
may mitigate initial revenue shortfalls.[Footnote 67] 

In order to identify and manage revenue instability, decision makers 
need regular information and analysis to understand potential 
vulnerabilities in the context of the specific fee design.[Footnote 
68]The appropriate analysis can help an agency obtain a thorough 
understanding of factors such as cost drivers and elements that 
influence collections. Without regular comprehensive reviews, agencies 
and Congress may miss opportunities to make improvements to a fee's 
design which, if left unaddressed, could contribute to inefficient use 
of government resources. For example, fee reviews could help ensure 
that fees are properly set to cover the total costs of those 
activities that are intended to be fully fee-funded, thus eliminating 
the need for direct appropriations for those activities. Furthermore, 
not reviewing fees regularly can create costly challenges for user fee 
programs and agencies, such as larger fee increases, when fees are 
ultimately increased. Regular fee reviews can help ensure that 
Congress, stakeholders, and agencies have complete information about 
changing costs and whether a fee needs to be changed, help identify 
opportunities to revise fees in ways that enhance user funding of 
goods or services above and beyond what is normally available to the 
public, and can be a useful step towards examining whether the 
activities themselves are duplicative or overlapping. 

HUD Has Not Assessed Other Authorized User Fees or Program Goals 
Related to the Manufactured Housing Fees Trust Fund: 

Since fiscal year 2009, Congress has authorized the HUD Manufactured 
Housing Program to collect additional user fees in the form of 
installation fees and dispute resolution fees in states where HUD 
operates installation and dispute resolution programs. The 2000 Act 
required HUD to establish and implement a manufactured home 
installation program for states that chose not to operate their own 
installation programs. According to HUD, the federal installation 
program ensures the inspection of over 7,000 manufactured home 
installations annually, as well as the training and licensing of over 
2,000 installers in the 19 states that do not have such 
programs.[Footnote 69] Additionally, the 2000 Act requires HUD to 
establish and implement a manufactured home dispute resolution program 
for states that choose not to operate their own dispute resolution 
programs. The program provides for the timely resolution of disputes 
between manufacturers, retailers, and installers regarding 
responsibility for the repair of defects in manufactured homes. HUD 
maintains a dispute resolution program in the 23 states that have no 
such program.[Footnote 70] 

Any dispute resolution and installation fees that HUD collects are to 
be deposited into the Manufactured Housing Fees Trust Fund and used to 
offset the costs of the Manufactured Housing Program. For fiscal years 
2009 through 2012, the Office of Manufactured Housing Programs stated 
that it intended to collect a total of $11.2 million in fees from its 
dispute resolution and installation programs. However, HUD officials 
told us that the agency had not collected any of these fees, citing 
reasons such as the insufficient resources to implement such fees and 
the considerable administrative and logistical burden the agency would 
face. Under the authority granted in section 620 of the 2000 Act 
allows the Office of Manufactured Housing Programs to use HUD label 
fees to help pay for other aspects of the program, such as the dispute 
resolution and installation programs. However, as we have seen, 
because HUD has not increased label fees it has not generated 
sufficient fee revenue to meet the program's costs. Despite this 
shortfall in fee revenue, HUD has not assessed how it might put in 
place a program for assessing and collecting installation and dispute 
resolution fees, nor has it assessed the costs and benefits that such 
a program might realize. 

HUD officials also stated that they have yet to develop any specific 
program goals that would help in establishing a minimum or maximum 
amount of reserve funding for the Manufactured Housing Fees Trust Fund 
or the appropriate levels of program carryover balances for the 
Manufactured Housing Program. Officials stated that the program's 
carryover balances vary from year to year; are based on label fees 
collected, general fund appropriations, and program obligations; and 
are capped each year by the budgetary authority granted to the Office 
of Manufactured Housing Programs in each year's congressional 
appropriations act. HUD officials stated that each fiscal year's 
carryover balance is established by the remaining amount of funding 
available once all program obligations had been paid, and consequently 
they saw little need to examine the costs or benefits of establishing 
longer or shorter goals for the Manufactured Housing Fees Trust Fund. 
Regardless of the authority under which a user fee reserve is created, 
setting clear goals for the reserve and clarifying how those reserves 
will be used helps ensure accountability and transparency both to 
Congress and users of fee-based programs. Agencies may wish to use a 
reserve to help ensure long-term financial stability, to position the 
agency to respond to varying economic conditions, to smooth expected 
fluctuations in costs or collections, or to build capital for 
necessary infrastructure improvements or mitigate unforeseen and 
unavoidable revenue shortfall. To further ensure accountability and 
adherence to any reserve fund goals, establishing minimum and maximum 
reserve levels, justified by program data and risk management 
considerations, may be advisable. 

Conclusions: 

Longstanding unresolved issues in implementing reforms to the HUD 
Manufactured Housing Program limit the potential for achieving key 
purposes specified in the 2000 Act. Although the 2000 Act mandates 
that HUD act on proposed changes to the HUD Code within a 1-year 
period of the proposal being approved by the MHCC, this requirement 
has not been effective in accelerating the rulemaking process. HUD has 
not considered any of the proposals made by the MHCC to be subject to 
the 1-year deadline because the MHCC has not submitted recommendations 
in the form of proposed rules with adequate economic analyses, as 
required by the Act. Because the MHCC and the previous administering 
organization lacked the expertise to develop recommendations in the 
proper form, HUD's staff has developed the proposed rules and 
conducted the economic analyses with limited staff resources. Despite 
these longstanding shortcomings, known resource limitations, and other 
administrative and legal impediments it faces, HUD has not identified 
how it might ensure more timely updates of the standards in achieving 
the purposes of the Act. As a result, it took over 10 years after 
receipt of a proposal from the MHCC for HUD to make some of the recent 
updates to the HUD Code. In contrast, building codes for use in site-
built (including modular) homes are updated on a recurring basis every 
3 years raising questions about HUD's effectiveness in establishing 
meaningful and timely standards for manufactured housing. Ultimately, 
delays in updating the standards can result in families seeking an 
affordable housing option bearing additional costs when they must 
retrofit their homes to meet local and state standards that have 
outpaced the scope of the HUD Code, or being denied the benefit of 
safety and other standards that the consensus committee has 
recommended. 

Although the higher cost of financing manufactured homes can limit 
their potential affordability, HUD has done little to implement the 
Act's requirements for reviewing FHA programs for providing 
manufactured home loans and developing any changes that might further 
promote the affordability of manufactured homes, or for conducting 
research and other efforts to determine the potential for the 
enterprises and Ginnie Mae to actively develop and implement better 
secondary market securitization programs for manufactured home loans. 
Although HUD PD&R proposed a study on the financing of manufactured 
homes for its 2014 to 2018 Research Roadmap, HUD selected other 
research projects over this proposal and does not yet plan to conduct 
this study. Without analysis and research into the contribution 
financing might make toward the affordability of manufactured housing, 
HUD has little assurance that its loan programs and securitization 
programs of Ginnie Mae and the enterprises are appropriately promoting 
the availability of affordable manufactured homes. 

HUD's efforts to ensure compliance with the HUD Code rely on actions 
of others, including the monitoring contractor that reviews the 
activities of inspectors of manufacturers. However, we found that HUD 
lacked consistent documentation of actions it had taken in response to 
significant audit findings of the monitoring contractor. Further, HUD 
has no mechanism to catalogue complaints received by HUD and the SAAs. 
Without such documentation and transparency, HUD cannot determine the 
nature and content of complaints and whether any patterns might 
suggest further analysis or action. Ultimately, these weaknesses limit 
the potential for the enforcement process to ensure that federal 
safety and construction standards for manufactured homes are having 
their intended effect. Given its limited resources, HUD will likely 
face continued challenges in ensuring its standards are followed and 
needs to make the most efficient use of the resources it does have to 
enforce those standards. 

In recent years, the HUD Manufactured Housing Program has relied on 
general fund appropriations to bridge the gap between its declining 
label fee revenue and its higher programmatic obligations. The current 
fee structure, which is based on per unit fees charged for labels 
indicating that units have been built in accordance with the HUD Code, 
is at its present amount not sufficient to fully fund the program. 
However, HUD had not put in place the increased label fees that it had 
proposed in 5 of the last 6 fiscal years.[Footnote 71] Nor has HUD 
taken steps to rigorously assess the feasibility of establishing 
inspection and dispute resolution fees that Congress has authorized. 
The 1990 CFO Act and OMB guidance provide for biennial fee reviews 
that include recommendations about adjustments to the fees, as 
appropriate. A rigorous analysis of user fees can help an agency 
obtain a thorough understanding of factors such as cost drivers and 
elements that influence collections. HUD cited a number of reasons for 
not increasing label fees or considering other fees, including 
political pressure, the presence of large carryover balances that grew 
after receiving general fund appropriations, and challenges in 
implementing new user fees. Given manufactured home production levels 
in recent years and the constrained resource environment that the 
federal government faces, it is important for HUD's Office of 
Manufactured Housing Programs to consider all revenue streams at its 
disposal including higher label fees and the potential for others fees 
already authorized by Congress. Further, delaying increases in user 
fees has the potential to require even higher fee increases when they 
are ultimately made--increasing any potential disruption to the 
manufactured housing market. 

Finally, the HUD Office of Manufactured Housing Programs has not 
established any programmatic goals for the Manufactured Housing Fees 
Trust Fund, or established recommended minimum and maximum reserve 
levels. Due to a lack of analysis, HUD may be unaware of the optimum 
levels of trust fund reserves or yearly carryover balances needed to 
maximize the Manufactured Housing Program's operational efficiency. 
GAO best practices state that unobligated balances in fee programs may 
represent a reserve intended to manage the effects of revenue 
instability. Setting clear goals for a program's user fee reserves and 
clarifying how those reserves will be used can help ensure both 
accountability and transparency to Congress and users of fee-based 
programs. To further ensure accountability and adherence to any 
reserve fund goals, establishing minimum and maximum reserve levels, 
justified by program data and risk management considerations, may also 
be advisable. However if agencies and Congress are not deliberate in 
their design of a reserve fund to effectively manage an agency's user 
fee program, any unobligated funds built up may be rendered 
ineffective as a reserve fund. In an era of limited resources, these 
steps will help HUD provide the most reliable information to Congress 
as it considers program funding and the sufficiency of fund reserves. 

Recommendations for Executive Action: 

To better ensure the viability and safety of manufactured housing 
produced in accordance with the HUD Code, the Secretary of the 
Department of Housing and Urban Development should take the following 
three actions: 

* Develop and implement a plan for updating construction and safety 
standards for manufactured homes on a timely, recurring basis to 
include: 

- addressing unresolved issues related to defining and developing 
sufficient economic analyses tied to proposed changes to the 
construction and safety standards; and: 

- ensuring sufficient resources and capacity within HUD and the MHCC 
and its administering organization; or: 

if such a plan cannot be devised and implemented, identify and report 
to Congress on alternative methods of ensuring the quality, 
durability, safety, and affordability of manufactured homes, including 
the possibility of relying more extensively on existing industry 
standards. 

* Develop a plan to assess how FHA financing might further promote the 
affordability of manufactured homes and identify the potential for 
better securitization of manufactured housing financing. 

* Strengthen the oversight of inspections and enforcement-related 
activities by: 

- consistently documenting actions taken to resolve recommendations 
from completed audits and the outcome of such actions, 

- completing a Transition Plan for the monitoring contractor activity, 
and: 

- exploring the feasibility of developing a cost-effective systematic 
process for collecting and evaluating information on the content of 
complaints. 

To better ensure that Congress, stakeholders, and agencies have 
complete information about changing costs and whether a fee needs to 
be changed, HUD should: 

* Complete the necessary rulemaking changes to allow the Office of 
Manufactured Housing Programs to adjust its label fees from the $39 
per label toward levels up to the congressionally authorized level 
that better reflect the current levels of manufactured home 
production, while considering the impact that such fees may have on 
the industry; put in place a process for regular fee reviews to 
determine whether the fees currently being charged will allow the 
program to respond to spikes and surges in label fee revenue and to 
identify any factors that may drive label fee revenue instability; and 
identify any additional sources of funding that may mitigate initial 
revenue shortfalls and the program's fixed and variable costs. 

* Assess the feasibility, including an analysis of the benefits and 
costs, of putting in place user fees for its dispute resolution and 
installation programs. 

* Establish the goals for use of reserves of the Manufactured Housing 
Fees Trust Fund, and the minimum and maximum thresholds for the 
reserves appropriate for meeting these goals. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to HUD for review and comment. HUD 
provided written comments that are discussed below and presented in 
Appendix I. HUD agreed with two recommendations, partially agreed with 
two recommendations, and stated its intent to consider the remaining 
two recommendations. HUD also described actions it planned to take or 
had taken in response after receiving the draft report. We reiterate 
the importance of HUD addressing fundamental program weaknesses and 
that it efficiently use the resources it has and take advantage of all 
potential sources of revenue. We therefore continue to recommend that 
HUD act on the report's recommendations. HUD also provided technical 
comments that were incorporated as appropriate. 

HUD agreed with our first recommendation to develop a plan to 
accelerate future updating of the construction and safety standards on 
a timely, recurring basis. Specifically, this plan would address, 
among other things, unresolved issues related to the economic analyses 
that must accompany proposed rules and ensuring that MHCC has 
sufficient resources to perform its duties. However, HUD said that 
implementing such a plan would be contingent upon its appropriations 
levels. As we stated in our report, HUD will likely face continued 
financial challenges in ensuring that its standards are followed and 
will need to make the most efficient use of available resources to 
enforce them. However, as stated in the report, we found that the lack 
of updates to the HUD Code had delayed implementation of important 
safety devices, reducing the effectiveness of the standards and, over 
time, creating discrepancies between the HUD Code and other commonly 
accepted residential building standards, which are updated every 3 
years. For example, several states require carbon monoxide detectors, 
which are not addressed by the HUD Code. The IRC and the American 
Society of Heating, Refrigerating, and Air-Conditioning Engineers have 
required carbon monoxide detectors for all residential site-built and 
modular homes since 2009 and 2010, respectively. Until HUD addresses 
the backlog of MHCC proposals, purchasers of manufactured homes could 
face increased costs due to a need to retrofit these homes and, in 
some cases, potential safety hazards. We also recommended that if HUD 
cannot devise and implement a plan for more timely HUD Code updates 
and improve its workforce planning efforts and budget submissions, it 
should identify and report to Congress alternative methods of ensuring 
the quality, durability, safety, and affordability of manufactured 
homes, such as relying more extensively on existing industry standards. 

HUD partially agreed with our second recommendation. HUD stated that 
Ginnie Mae agreed to develop a plan to identify the potential for 
better securitization of manufactured housing financing and that FHA 
would coordinate with Ginnie Mae as needed. However, HUD did not agree 
to develop a plan to assess how FHA financing might further promote 
the affordability of manufactured homes. HUD responded that FHA 
continuously monitors its programs to ensure that affordable credit is 
available. HUD added that FHA manufactured home policies and 
information on FHA Title I loans is to be included in HUD's Single 
Family Policy Handbook, which is under development. Consolidating such 
program guidance may help lenders better understand FHA programs, but 
there is more that FHA could do to systematically assess how FHA 
financing might further promote the affordability of manufactured 
homes. The first step is to plan for such an assessment, as we 
recommend. As we state in our report, owners of manufactured homes use 
the Title I program, which was intended in part to serve the needs of 
the manufactured housing market, less often than Title II. FHA 
officials were not aware of barriers that might have precluded 
homeowners from applying for Title I loans. Recognizing the impact 
that a lack of low-cost financing could have on the affordability of 
manufactured homes, Congress directed HUD to review the FHA loan 
programs. However, as noted in the report, HUD has not taken action to 
fully address this requirement. As such, we recommended that HUD first 
develop a plan to formulate its actions to help ensure that the goals 
and objectives of these loan programs can be met. Without an analysis 
of and research into the contribution financing might make toward the 
affordability of manufactured housing, HUD has little assurance that 
its loan programs are appropriately promoting the availability of 
affordable manufactured homes. Thus, we continue to believe HUD should 
take action to fully implement this recommendation. 

HUD agreed with our third recommendation to strengthen oversight of 
inspections and enforcement-related activities. For example, HUD 
stated that it will consistently document actions taken to resolve 
recommendations from completed audits and their outcomes. In addition, 
after the agency received our draft report, HUD accepted a completed 
transition plan for the new monitoring contract. This action is 
consistent with our recommendation. Finally, HUD agreed to explore the 
feasibility of establishing a cost-effective systematic process for 
collecting and evaluating information on the contents of complaints. 
For example, HUD stated it would evaluate monitoring contractor 
findings resulting from manufacturer records during in-plant record 
reviews and from information collected by IPIAs resulting from their 
expanded requirements to review manufacturer service records at least 
monthly. HUD stated the process will include the establishment of a 
complaint log that the agency could use to regularly review complaints 
it received to determine whether investigations were warranted under 
HUD's enforcement regulations. We note in the draft that such a log 
would help assure that safety standards are followed. 

HUD partially agreed with our fourth recommendation about implementing 
the necessary rulemaking changes to raise the label fee and putting in 
place a process for regular fee reviews. HUD reported that it had 
published a proposed rule in the Federal Register to increase the 
label fee from $39 to around $100 (as we provided the draft report for 
review and comment). Therefore, we revised the recommendation to 
direct HUD to complete the necessary rulemaking changes to allow for 
the label fee to be increased. HUD stated that it already had a 
process in place to regularly review user fees and that it was 
considering seeking authority to allow it to change the fee by Notice, 
rather than under full rulemaking procedures to better address 
possible revenue fluctuations in the future. However, as we noted in 
the report, the current user fee analysis provided by HUD was based on 
production estimates, appropriations, the amount of carryover from the 
previous year, and anticipated expenses. We noted that best practices 
for user fee reviews, such as examining the fixed and variable 
programmatic costs in relation to the user fees charged, and 
additional sources of funding that may mitigate initial revenue 
shortfalls or instability in the future, should be performed in 
maintaining the Manufactured Housing Fees Trust Fund. As a result, HUD 
continues to risk being unable to properly manage future revenue 
shortfalls if user fees are insufficient. Thus, we continue to believe 
HUD should take action to fully implement this recommendation. 

HUD agreed to consider our fifth recommendation that it assess the 
feasibility of putting in place user fees for dispute resolution and 
installation programs, but stated that its ability to do so is 
dependent upon appropriations levels. As we noted in the report, 
future user fee reviews must take into account additional sources of 
funding that could help prevent shortfalls, such as user fees from 
dispute resolution and installation programs. As discussed in the 
report, HUD has not collected such fees as authorized by Congress 
citing reasons such as insufficient resources. HUD officials explained 
that HUD label fees are to be used to pay for dispute resolution and 
installation programs. However, we found that because HUD had not 
increased label fees that it had not generated sufficient revenue to 
meet the program's costs. As such, we believe that HUD should assess 
how it might put in place a program for assessing and collecting 
installation and dispute resolution feeds to strive to align these 
fees with costs in order to actively manage revenue instability. Thus, 
we continue to believe HUD should take action to fully implement this 
recommendation. 

HUD stated it would consider our sixth recommendation to establish 
goals for the use of reserve funds and the minimum and maximum 
thresholds for the reserves appropriate for meeting those goals. HUD 
stated that it is interested in obtaining more information on best 
practices for trust fund reserves for evaluating future fee amount 
changes. HUD also noted that by fiscal year 2015 it expects to operate 
solely on fee income after fiscal 2015 and does not foresee any 
remaining carryover balances at that time. However, as stated in the 
report, agencies may wish to use a reserve to help ensure the long-
term financial stability of a user fee-funded program, to position the 
agency to respond to varying economic conditions, to smooth expected 
fluctuations in costs or collections, or to build capital for 
necessary infrastructure improvements or mitigate unforeseen and 
unavoidable revenue shortfall. To further ensure accountability and 
adherence to any reserve fund goals, establishing minimum and maximum 
reserve levels, justified by program data and risk management 
considerations levels, may be advisable. Thus, we continue to believe 
HUD should take action to fully implement this recommendation. 

In other comments, HUD officials voiced concerns over the manner in 
which we characterized efforts to update the HUD Code. Specifically, 
HUD officials took issue with a summary statement that it had not 
completed actions on recommendations from the MHCC within one year of 
their submission. We clarified the statement to specify that HUD had 
not accepted, modified, or rejected MHCC recommendations within one 
year of submission. HUD pointed to its position, already included in 
the draft report, that the one-year time period has never been 
triggered because HUD has never received recommendations with the 
proper economic analysis or format for rulemaking. In other comments 
HUD listed a series of administrative and legislative impediments to 
producing more timely updates to the standards. For example, HUD said 
that a requirement to publish a proposed rule within the 30-day time 
frame stipulated in the 2000 Act is unrealistic. In response, we 
further describe these concerns in the report. The challenges HUD 
faces in addressing these longstanding issues underscores the need for 
HUD to develop and implement a plan for updating construction and 
safety standards for manufactured homes on a timely, recurring basis, 
as we recommended. Further, as we recommended, if such a plan cannot 
be devised and implemented, HUD should identify and report to the 
Congress alternative methods of ensuring the quality, durability, 
safety, and affordability of manufactured homes, including the 
possibility of relying more extensively on existing industry standards. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Secretary of Housing and Urban Development and interested 
congressional committees. The report also is available at no charge on 
the GAO website at [hyperlink, http://www.gao.gov]. If you or your 
staff have any questions about this report, please contact me at (202) 
512-8678 or sciremj@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. 

GAO staff who made major contributions to this report are listed in 
appendix II. 

Signed by: 

Mathew J. Scirè: 
Director: 
Financial Markets and Community Investment: 

[End of section] 

Appendix I: Comments from the Department of Housing and Urban 
Development: 

U.S. Department of Housing and Urban Development: 
Assistant Secretary for Housing--Federal Housing Commissioner: 
Washington, DC 20410-8000: 

May 22, 2014: 

Mr. Mathew J. Scire: 
Director: 
Financial Markets and Community Investment: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548-0001: 

Dear Mr. Scire: 

Thank you for the opportunity to respond to the Government 
Accountability Office (GAO) draft report GAO-14-41O, dated May 2, 
2014, entitled, "Manufactured Housing: Efforts Needed to Enhance 
Program Effectiveness and Ensure Funding Stability". This letter 
conveys the Department of Housing and Urban Development (HUD) response 
to the audit. 

With regards to the recommendations found in the report, HUD's 
specific responses are below. 

GAO Recommendations for Executive Action: 

To better ensure the viability and safety of manufactured housing 
produced in accordance with the HUD Code, the Secretary of the 
Department of Housing & Urban Development should take the following 
three actions: 

Recommendation #1: 

* Develop and implement a plan for updating construction and safety 
standards for manufactured homes on a timely, recurring basis to 
include: 

- Addressing unresolved issues related to defining and developing 
sufficient economic analyses tied to proposed changes to the 
construction and safety standards; and; 

- Ensuring sufficient resources and capacity within HUD and the MHCC 
and its administering organization; or: 

If such plan cannot be devised and implemented, identify and report to 
Congress alternative methods of ensuring the quality, durability 
safety, and afford ability of manufactured homes, including the 
possibility of relying more extensively on existing industry standards. 

HUD Response: 

* HUD agrees to develop a plan to accelerate future updating of the 
construction and safety standards on a recurring basis, but 
implementation is contingent upon appropriations levels. The plan will 
focus on: 

- Addressing unresolved issues related to developing an economic 
analysis by use of HUD program staff/economists; 

- Ensuring sufficient resources within HUD, MHCC and the administering 
organization are available to assist the MHCC with ongoing 
participation and support throughout the entire process of developing 
and preparing proposed revised standards in the form of a proposed 
rule; 

- More effectively utilizing the MHCC to propose and process proposed 
rules for standards' updates; and; 

- Encouraging consideration by the MHCC of existing industry standards 
to facilitate changes to the standards, when those standards would 
provide comparable quality, durability, safety, and affordability. 

Recommendation #2: 

* Develop a plan to: 

- Assess how FHA financing might further promote the affordability of
Manufactured homes and; 

- Identify the potential for better securitization of manufactured 
housing financing. 

HUD Response: 

* FHA continuously monitors all of its programs to ensure it meet its 
dual mission to provide access to affordable credit while protecting 
the insurance fund. In October 2013, FHA announced that it was 
developing a new Single Family Housing Policy Handbook that would be a 
sole source of all Single Family Policy. The consolidation of all Single
Family Policy (including FHA Manufactured Home policies) into a single 
source document will make doing business with FHA easier to understand 
and implement for participating lenders, thereby promoting the use of 
FHA programs in all areas. The first section of the Handbook (Title II 
Application through Endorsement) was posted for feedback on October 
29,2013. Additional sections, including FHA Title I, are being created 
and will be posted later this year. 

* Ginnie Mae agrees with the recommendation to develop a plan to 
identify the potential for better securitization of manufactured 
housing financing, and FHA will coordinate with Ginnie Mae as needed. 

Recommendation #3: 

* Strengthen the oversight of inspections and enforcement-related 
activities by: 

- Consistently documenting actions taken to resolve recommendations from
completed audits and the outcome of such actions; 

- Completing a Transition Plan for the monitoring contract activity; 

- Exploring the feasibility of developing a cost-effective systematic 
process for collecting and evaluating information on the contents of 
complaints. 

HUn Response: 

* HUD agrees with this recommendation. HUD will strengthen oversight 
of inspections and enforcement related activities by consistently 
documenting actions taken to resolve recommendations from completed 
audits and their outcomes, by performing monthly reviews of audit 
findings conducted to determine if monitoring inspections have 
identified possible classes of homes that fail to meet the Standards. 
Documentation of appropriate actions taken against manufacturers in 
those circumstances will be consistently maintained. 

* Additionally, a Transition Plan has been completed for the new 
monitoring contract and has been accepted by the Department. 

* HUD agrees to explore the feasibility of developing a cost-effective 
systematic process for collecting and evaluating information on the 
content of complaints; based on complaints received from consumers and 
others in the states that do not have a State Administrative Agency
(SAA), by evaluating, monitoring contractor findings resulting from 
manufacturer records during in-plant record reviews in SAA and non-SAA 
States, and from information collected by IPIAs resulting from their 
expanded requirements to review manufacturer service records at least
monthly as is now required under recent revisions to the Manufactured 
Home Procedural and Enforcement Regulations. This process will include 
the establishment of a complaint log which will be used by HUD to 
regularly review complaints received on a monthly or more frequent
basis to determine if class investigations are warranted under Subpart 
I of the Manufactured Home Procedural and Enforcement Regulations. 
This log will also include any complaint referrals received from SAAs 
involving serious defects or imminent safety hazards to assist HUD in 
identifying any homes in other states with similar safety related 
problems and concerns so that HUD can provided the necessary oversight 
to ensure that all such homes are also addressed and corrected. 

Recommendation #4: 

* To better ensure that Congress, stakeholders, and agencies have 
complete information about changing costs and whether a fee needs to 
be changed, HUD should implement the necessary rule-making changes to 
allow the Manufactured Housing Office to adjust its label fees from the
$39 per label towards levels up to the Congressionally authorized 
$100, that better reflect the current levels of manufactured home 
production, while considering the impact that such fees may have on 
the industry; put in place a process for regular fee reviews which 
a\low the agency to determine whether or not current fees being 
charged will allow the program to respond to spikes and surges in 
label fee revenue and to identify factors that may drive label fee 
revenue instability, any additional sources of funding that may 
mitigate initial revenue shortfalls and the program's fixed and 
variable costs. 

HUD Response: 

* A proposed rule to increase the label fee from $39 to $100 was 
published in the Federal Register on May 2, 2014. 

* HUD has put in place a process for regular fee reviews, which have 
been conducted as part of the annual budget cycle justifications and 
on an on-going basis to determine if adequate funds are available from 
projected and available fee revenue to support all program operations. 
In order to better address possible revenue fluctuations in the 
future, HUD is considering seeking authority to allow it to change the 
fee by Notice, rather than under full rulemaking procedures as 
currently required, in order to allow HUD to more readily respond to 
increases or reductions in the production of manufactured homes, which 
drive the amount of label fee revenue received by the program office. 

Recommendation #5: 

* Assess the feasibility, including an analysis of the benefits and 
costs, of putting in place user fees for its dispute resolution and 
installation programs. 

HUD Response: 

* HUD agrees to consider this recommendation, but the ability to 
assess the feasibility is dependent upon appropriations levels. 

Recommendation #6: 

* Establish the goals for use of reserves of the Manufactured Housing 
Trust Fund, and the minimum and maximum thresholds for the reserves 
appropriate for meeting these goals. 

HUD Response: 

* HUD will consider this recommendation further. HUD is interested in 
obtaining more information on best practices for trust fund reserves 
and will take those best practices into consideration when evaluating 
the need for future changes in the fee amount. It should be noted that 
carryover balances accrued from prior years will be fully exhausted in 
FY 14, with little margin projected for FY15 when the program is 
proposed to operate solely based on fee income and no direct 
appropriations. 

We appreciate the efforts of the GAO to review the HUD Manufactured 
Housing Program and make recommendations to enhance program 
effectiveness and ensure funding stability. 

Sincerely, 

Signed by: 

Carol J. Galante: 
Assistant Secretary for Housing--Federal Housing Commissioner: 

[End of section] 

Appendix II: GAO Staff Contact and Acknowledgments: 

GAO Contact: 

Mathew J. Scirè, (202) 512-8678 or sciremj@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Andy Finkel (Assistant 
Director), Barry Kirby (Analyst in Charge), Tim Bober, Stephen Brown, 
Tarik Carter, Emily Chalmers, Pamela Davidson, Alexandra Edwards, 
Juliann Gorse, Felicia Lopez, John McGrail, Marc Molino, Ruben Montes 
de Oca, Dae Park, Nadine Garrick Raidbard, Katherine Trimble, and 
James Vitarello made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Pub. L. 106-569, Title VI. 

[2] GAO, Manufactured Housing Standards: Testing and Performance 
Evaluation Could Better Ensure Safe Indoor Air Quality, [hyperlink, 
http://www.gao.gov/products/GAO-13-52] (Washington, D.C.: Oct. 24, 
2012). 

[3] The Consumer Financial Protection Bureau (CFPB) recently published 
a Fact Sheet stating that it is considering changes to the reporting 
requirements for lenders under HMDA. One change under consideration is 
for lenders to report for manufactured housing loans the type of 
financing, such as chattel or mortgage loans, and whether the borrower 
will own or lease the land where the home is sited. 

[4] GAO, Federal User Fees: Fee Design Options and Implications for 
Managing Revenue Instability, [hyperlink, 
http://www.gao.gov/products/GAO-13-820] (Washington, D.C.: Sept. 30, 
2013) and Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008). 

[5] 42 U.S.C. 5401et seq. 

[6] For the purposes of this report, a site-built home refers to 
houses that are constructed on a permanent foundation, built to state 
and local building codes, but does not include multifamily structures. 

[7] According to ICC, 43 states and the District of Columbia have 
adopted or based their own state site-built and modular home 
construction and safety codes on the ICC's IRC. In the remaining 7 
states, local counties or municipalities determine their own 
residential building standards. The IRC is updated every 3 years by 
the ICC. States and localities, however, are not required to adopt the 
codes produced by the ICC and independently decide which versions or 
parts of the IRC to adopt. 

[8] In some communities, the owners of the homes may collectively own 
the community real estate in the form of a cooperative. 

[9] The MHCC also recommends proposals for installation standards. 

[10] 42 U.S.C. 5403(d). 

[11] The Manufactured Homes Survey reports annual data for each 
calendar year instead of fiscal year. 

[12] We determined that a home was "non-metropolitan" if the home was 
located in an area (urban or rural) outside of metropolitan 
statistical areas. 

[13] We limited our analysis of 2011 AHS data, the most recent data 
available, to manufactured homes built after 1974, when HUD began 
regulating these units. 

[14] These figures refer to occupied housing units. 

[15] The average is based on the mean and is calculated as the total 
dollars of sales divided by the total number of houses sold. 

[16] The AHS defines monthly housing costs for owner-occupied units as 
"the sum of monthly payments for all mortgages or installment loans or 
contracts [...], real estate taxes (including taxes on manufactured/ 
mobile homes, and manufactured/mobile home sites if the site is 
owned), property insurance, homeowner association fees, cooperative or 
condominium fees, mobile home park fees, land rent, and utilities." 
Energy efficiency, and the impact on utility bills, is another factor 
impacting the affordability of manufactured homes. See GAO, Green 
Affordable Housing: HUD Has Made Progress in Promoting Green Building, 
but Expanding Efforts Could Help Reduce Energy Costs and Benefit 
Tenants, [hyperlink, http://www.gao.gov/products/GAO-09-46], 
(Washington, D.C.: Oct. 7, 2008). As of May 2014, the HUD Code has not 
been updated to include nearly all proposed energy efficiency 
improvements from the MHCC. 

[17] In non-metropolitan areas, where the majority of manufactured 
homes are located and monthly housing costs in general are lower, the 
majority of owners of manufactured homes still had lower monthly 
housing costs than other households. According to the 2011 AHS, 50.8 
percent of owner-occupied manufactured homes located in non-
metropolitan areas paid less than $500 in monthly costs, compared to 
31.7 percent of single family detached homes and 36.7 percent of 
apartment renters. 

[18] We defined higher priced loans as 150 basis points or more above 
the current Freddie Mac 30-year fixed-rate mortgage at the time of 
loan origination. 

[19] There are three property types in HMDA, one-to-four family homes 
(excluding manufactured housing), manufactured housing, and 
multifamily. We calculated the share of manufactured housing loans to 
be the number of manufactured housing loans divided by the sum of one-
to-four family home loans and manufactured housing loans since this 
most closely approximates the share of manufactured housing loans of 
single family homes as possible using HMDA data. 

[20] For the purposes of this report, a conventional loan refers to 
loans neither made by nor insured or guaranteed by the federal 
government. 

[21] The Senate report that accompanied the Act stated that the 
purpose of the legislation was setting up a process to update 
manufactured housing construction and safety standards on a timely 
basis. 

[22] Office of Management and Budget (OMB) Circular A-4 states that 
agencies must demonstrate the need for federal regulatory action, 
consider alternative approaches, and conduct benefit-cost and cost-
effectiveness analyses. 

[23] According to HUD, at least part of the delay was attributable to 
a bid protest filed in connection with HUD's process for awarding a 
new contract for an administering organization. The bid protest was 
resolved in HUD's favor earlier this year. See International Code 
Council, B-409146, Jan. 8, 2014, 2014 CPD ¶ 26. On June 18, 2014, HUD 
awarded a new contract for a new administering organization. 

[24] If HUD determines that a standard is necessary in response to a 
public health or safety emergency, the agency may issue an order 
without the MHCC's approval after a period of public comment. 

[25] 42 U.S.C. 5403(a)(4) 

[26] MHCC members did not meet or propose standards since from October 
2012 until June 2014. 

[27] OMB Circular A-4 provides guidance on conducting regulatory 
analysis, including the development of economic analysis. 

[28] The Consolidated Appropriations Act of 2014 stipulated that HUD 
must employ an administrator for the Office of Manufactured Housing 
within 120 days. Pub. L. 113-76, 128 Stat. 605. HUD selected an 
administrator on March 6, 2014. 

[29] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[30] GAO, Manufactured Housing Standards: Testing and Performance 
Evaluation Could Better Ensure Safe Indoor Air Quality, [hyperlink, 
http://www.gao.gov/products/GAO-13-52] (Washington, D.C.: Oct. 24, 
2012). Carbon monoxide detectors are not intended to be used as a 
measure of, or to test for, adequate indoor air quality but are a 
safety device to warn occupants in the event of a dangerous build-up 
of carbon monoxide gasses in the air. 

[31] [hyperlink, http://www.gao.gov/products/GAO-13-52]. 

[32] Title I also insures private lenders against loss on property 
improvement loans for single family homes, multifamily structures, and 
nonresidential buildings. 

[33] According to FHA officials, the Title II data on manufactured 
homes include modular homes. 

[34] In 2012, over 4,000 newly placed manufactured homes were not 
titled. 

[35] Ginnie Mae guarantees the performance of mortgage-backed 
securities, which are obligations of the issuers and are backed by 
mortgages insured or guaranteed by federal agencies, such as FHA, VA, 
or USDA's Rural Housing Service. Ginnie Mae is a wholly owned 
government corporation within HUD. 

[36] Ginnie Mae began securitizing manufactured housing loans in the 
early 1970s. However, 12 Ginnie Mae issuers with $1.8 billion of 
securities backed by Title I loans defaulted between 1986 and 1988, 
and Ginnie Mae had to assume their portfolios, resulting in 
significant losses. From 1989 until 2010, Ginnie Mae imposed a 
moratorium on the acceptance of new issuers in the manufactured 
housing program to prevent further losses. According to Ginnie Mae 
officials, Ginnie Mae continued to experience issuer defaults during 
the moratorium, with the last one in 1997. 

[37] FHA insurance covers 90 percent of losses from defaulted Title I 
loans and up to 100 percent of losses from defaulted Title II loans. 

[38] Field Hearing before the Subcommittee on Housing, Insurance and 
Community Opportunity, Committee on Financial Services, U.S. House of 
Representatives, State of U.S. Manufactured Housing Industry, 
(Danville, VA: Nov. 29, 2011). 

[39] 2012 HMDA data do not include credit score information. 

[40] Additionally, the FHA Manufactured Housing Loan Modernization Act 
of 2008 required HUD to revise FHA's Title I program. See Pub. L. 110-
289, Division B §§ 2141-2150. HUD revised Title I to increase loan 
amount limits and amend credit underwriting requirements, among other 
changes. See Title I letters TI 481 and TI 484. Also, in response to 
the FHA Modernization Act, Pub. L. 110-289, Division B, §§ 2101-2133, 
HUD made manufactured homes eligible for Title II insurance if treated 
as real estate by the local authority, even if not treated as real 
estate for purposes of state taxation, as well as individual 
manufactured housing units in condominium projects. See Mortgagee 
Letter 2009-16. 

[41] HUD, PD&R, Regulatory Barriers to Manufactured Housing Placement 
in Urban Communities, (Washington, D.C.: January 2011). 

[42] From 1998 to 2008, PD&R coordinated the publication of studies on 
manufactured homes technology under the Partnership for Advancing 
Technology in Housing (PATH) program. The goal of the program was to 
accelerate the creation and use of technologies in order to improve 
the affordability, quality, durability, and environmental and energy-
efficiency of homes and some PATH studies focused on manufactured 
homes. 

[43] RHS loan guarantee programs are available to borrowers with new 
manufactured homes on permanent foundations but do not finance 
manufactured housing titled as personal property. 

[44] Pub. L. 110-289. 

[45] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[46] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[47] FAR 46.103(e). 

[48] Since we sent a draft of this report to the agency for comment, 
HUD has accepted a transition plan from its monitoring contractor, 
which was the same entity that served as the monitoring contractor for 
the contract that ended July 2012. 

[49] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[50] A hinged roof allows for the construction of a steeper, higher 
pitched roof. For such a roof, setup and final construction occurs on-
site instead of at the factory. 

[51] Homes that are certified as Energy Star must undergo quality 
assurance testing on-site to validate, among other things, whether the 
home was constructed tightly enough, to minimize air leaks, and with 
sufficient ventilation air flow to maintain sound indoor air quality. 

[52] HUD has issued a proposed rule to more fully address on-site 
construction activities and simplify current alternative construction 
procedures. 75 Fed. Reg. 35902 (June 23, 2010). As of May 2014, the 
proposed rule had not yet been issued as a final rule. 

[53] The Energy Star certification requires testing to ensure that the 
home is constructed with minimal air leakage and adequate whole-house 
ventilation. Such testing is also incorporated into the current IRC 
used for site-built homes. 

[54] [hyperlink, http://www.gao.gov/products/GAO-13-52]. 

[55] 42 U.S.C. § 5419(a) 

[56] 42 U.S.C. § 5419(e) 

[57] 42 U.S.C. § 5419(d) 

[58] 42 U.S.C. § 5419(a) 

[59] Revenue figures shown in current dollars (unadjusted for 
inflation), as we compared them to the corresponding obligations for 
each fiscal year. 

[60] Estimates for fiscal year 2014 are based on a proposed fee 
increase of $100 per label for 6 months. Without a fee increase, the 
program projects it would generate only $3.5 million in label fee 
collections. 

[61] Appropriations and carryover balances shown in current dollars 
(unadjusted for inflation), as we compared them to the corresponding 
obligations for each fiscal year. 

[62] Fiscal year 2013 projections do not assume an increase in the 
label fee. 

[63] Collected and anticipated fees shown in current dollars. 

[64] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[65] The same day in which the agency received a draft of this report 
for review and comment, HUD published in the Federal Register a 
proposed rule calling for the increase of label fees from the current 
$39 per unit fee to an amount anticipated to be no less than $95 and 
no more than $105. This proposed rule outlines HUDs plans to increase 
the label fee and HUD officials hope to have a final rule permitting 
this increase ready to be implemented at the end of 2014. 

[66] [hyperlink, http://www.gao.gov/products/GAO-13-820], p. 18. 

[67] [hyperlink, http://www.gao.gov/products/GAO-13-820], p. 41. 

[68] [hyperlink, http://www.gao.gov/products/GAO-13-820], p. 25. 

[69] Any state that wishes to operate its own installation program 
must have state installation standards that provide at least the same 
protection provided by the federal installation standards. 42 U.S.C. § 
5404(c)(2)(B)(3). 

[70] A state dispute resolution program must meet the requirements of 
the Act for operating in lieu of the HUD dispute resolution program. 
42 U.S.C. § 5422(c)(12). 

[71] The same day in which the agency received a draft of this report 
for review and comment, HUD published in the Federal Register a 
proposed rule calling for the increase of label fees from the current 
$39 per unit fee to an amount anticipated to be no less than $95 and 
no more than $105. This proposed rule outlines HUDs plans to increase 
the label fee and HUD officials hope to have a final rule permitting 
this increase ready to be implemented at the end of 2014. 

[End of section] 

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To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]; 
E-mail: fraudnet@gao.gov; 
Automated answering system: (800) 424-5454 or (202) 512-7470. 

Congressional Relations: 

Katherine Siggerud, Managing Director, siggerudk@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, DC 20548. 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, DC 20548. 

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