Paper TigerMissing Dragon

Poor Service and WorseEnforcement Leave Manufactured

Homeowners in the Lurch

New designs and elaborate floor plans make manu-factured housing a much more attractivehomeownership option for low and middle

income families. But a reputation for poor quality clings tothe industry, despite decades of work to break out of itstravel trailer roots. This report examines the driving forcesbehind this poor image. We look at what breaks, how theindustry performs on customer service, and how success-fully the state and federal regulatory system encouragesquality improvement.

We find an industry still very much struggling withissues of home quality and customer service.! Different construction techniques and materials lead

to different types of complaints than reported by sitebuilt homeowners.

! Consumers pay for homes before they are fully built(installed and repaired), and report widespreadproblems with installation and warranty service.

! The regulatory system has failed thus far to protectconsumers and effectively encourage improvements inbusiness practices.If the manufactured housing industry intends to forge

a new image with consumers, its work is not yet done.Manufacturers will need to assume greater responsibilityfor the final product, and regulators will need to be much

more responsive to consumers, before manufacturedhousing can reach its potential as an asset building invest-ment for new homeowners.

The Consumers Union studyIn February 2002, Consumers Union issued the first of

two reports: “In Over Our Heads: Consumers ReportPredatory Lending and Fraud in Manufactured Housing.”The report detailed consumer problems shopping for amanufactured home, financing it, and closing the deal. Inthis report, we pick up where we left off and follow con-sumers through the early years of their new purchase.

Consumers Union randomly surveyed 122 recentpurchasers of manufactured homes to find out about theirexperiences with their home.1 Following the methodologyof the companion report “In Over Our Heads,” we alsoreviewed 300 complaints on file at the Texas Departmentof Housing and Community Affairs Manufactured HousingDivision (TDHCA). These were randomly selected fromthe 3,627 filed over the two-year period ending June of2002.2

Consumers Union obtained from the Federal Depart-ment of Housing and Urban Development (HUD),through the Freedom of Information Act, summary infor-mation from its national compliance tracking database forits manufactured housing program. This database contains

information on complianceviolations primarily relatedto home construction andquality collected by HUDand its contractors throughits audit and monitoringactivities. Over 53,000violations or possibleviolations were identified inthe database supplied tous.3

Finally, we looked atdata related to homedurability and home main-tenance from the AmericanHousing Survey, a biannualsurvey by the federalgovernment of about 55,000residents of all types ofhousing. This allowed us tomake some comparisonsbetween manufactured andconventional housingproducts.

Home constructionquality

Consumers pay morefor a home, and accept agreater debt burden, thanfor any other pur-chase. For low in-come consumers inparticular, the homeultimately becomesthe family’s primarysource of wealth as itbuilds equity overtime. But in order tobuild equity andmeet a family’shousing needs the

house must be durable.Many people believe that,over time, manufacturedhomes fall apart. Theindustry has gone to greatlengths to change thatperception.

A home is a manufac-tured home because it isbuilt in a factory in accor-dance with its own nationalbuilding code (See sidebarThe HUD Code and InspectionSystem, p. 9). Once muchmore “mobile” than today,manufactured homes arestill sold off a dealer lot likea car and have to be movedto the consumer’s landlater. The move can causedamage to the home.

Most manufacturedhomes need work uponinstallation. Lenders paythe dealer before the dealerhas completed installationand warranty repairs, whichsometimes take months oreven years. By contrast, aconventional home is

usually completeon its final lotwhen it is sold,and if work isneeded, contrac-tors are not paid infull by the mort-gage companyuntil the homereceives a finalinspection.

These differ-

ences in thesales andconstructionprocess onlymatter to consum-ers if they effectthe quality of thehome. Consumers Unionsurveyed new home ownersto assess their generalsatisfaction.

About a third (36percent) of manufacturedhomeowners indicated thatoverall they were moresatisfied than dissatisfiedwith their new home,including 16 percent whoindicated they were com-pletely satisfied. (We askedconsumers to rate “Are yousatisfied with all aspects ofyour home” on a 5 pointscale).

Another third (33percent) of all new manu-factured homeownerssurveyed were more dissat-isfied than satisfied, includ-ing 17 percent who werecompletely dissatisfied.This dissatisfaction wasdirectly tied to whether ornot the consumer hadproblems with his or herhome. We asked “Have youexperienced any problemswith your home,” and astunning 79 percent ofrespondents indicated thatthey had. Not surprisingly,consumers with problems

were less satisfied as agroup than those with noproblems.

In addition to our ownsurvey of new home buyers,we reviewed a randomsample of complaints filedwith the state to identifythe specific home qualityproblems most oftenreported. They ranged fromthe catastrophic (houseframe damaged when thehouse was got stuck in aditch on delivery4), to theannoying (we received nokeys to the house). Most fitinto broad patterns—common stories that weheard repeatedly fromconsumer to consumer.The table on p. 6 lists the

Problem areas reportedby new homeowners

Consumers Union surveyed newhomeowners, asking people to tell usthe areas of the home that causedthem trouble. Table sums to morethan 100% because somehomeowners reported more than oneproblem.

swodniw/srooD %04

gnibmulP %23

sllaW %72

fooR %81

)gnirevoc(roolF %41

)larutcurts(roolF %8

CAVH %6

noitadnuoF %6

gnidiSroiretxE %5

stenibaC %9

mirTroiretnI %5

secnailppA %4

steltuO %5

gnilieC %4

gnitrikS %3

draoBylleB %1

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

6

areas of the home founddeficient by consumers inour complaint study.

Problems with doorsand windows top the list,appearing in 89 complaints,or 61 percent of the 146complaints that citedspecific home quality

problems. Walls,interior trim, floorcoverings, and roofsfollow closely behind. Thiscorresponds to responses toour new homeowner sur-vey—doors and windows,plumbing, walls, and roofswere the top four home-owner problems.

Constructionimprovement since the 70s

We found that sometraditional problem areasfor mobile homes appear tohave improved over the lastfew decades. ElsieRodriguez grew up in amanufactured home andrecently purchased a newone with her husband.After a year in her home,she told Consumers Union“back then, in early 70s,they weren’t made as wellas they are now, but …[they] still have problems.If I had to do it over Iwouldn’t buy a manufac-tured home. I would wait alittle bit longer.” Mrs.Rodriguez is frustrated witha drip under her sink,problems with the ACducts, and a rip in herbottom board.5

The plumbing inmanufactured homes haslong had a reputation as aweak point in the construc-tion. A class action suit inthe mid-90s about

polybutlenepipes (oncecommon in

manufactured housing)raised concerns aboutproblems with piping. Theindustry has now movedaway from this material. Inboth AARP and ConsumerReports surveys in the late90’s, about a third ofconsumers reported plumb-ing problems. Our currentsurvey of homeowners camein at the same level.These complaint levels aredown from 67 percent ofconsumers in a 1973 surveyin Ohio.6

Today plumbing prob-lems are commonly relatedto fixtures. About 14.6percent of HUD citationssince 1995 related toplumbing, and more thanhalf of these specificallycited problem fixtures—more than citations for poordistribution and drainplumbing systems com-bined. In fact, problemswith the tub fixtures alonecomprised 1.9 percent of allthe HUD citations.

The American Housingsurvey shows 57 percentmore manufactured homedwellers performed majorrepairs on their plumbingfixtures than site builtdwellers. A wide variety offixtures are available onmanufactured homes,

ranging from brands thatcater to the manufacturedhousing market to nationalbrands that also compete inthe site built market.Fixtures in a given homemay vary, with upgradesmore common in highvisibility areas such askitchens and master baths.

In 1973, nearly twothirds of consumers re-ported trouble with thewaterproofing of the house.Today, our analysis ofAmerican Housing Surveydata indicates that manu-factured home owners wereno more likely to haveperformed a major repair totheir roof than conventionalhome owners, and roughlythe same level of residentsreported water leaking infrom the outside.7

Roof problems in amanufactured home rangefrom loose shingles andleaks to gaps at the matingline between sections.Shingle failures are thenumber one specific prob-lem reported in the HUDcompliance database,comprising 3.8 percent ofthe citations (see discus-sion, p. 8).

Manufactured homesare available with two rooftypes: a metal roof or ashingled roof. Most upscale

Problem areas reportedby TDHCA complainants

Consumers Union tracked theproblem areas in the homeidentified by those who wrotecomplaints to TDHCA. Most com-plaints identified more than oneproblem. Note that trim and floorcovering problems become formalcomplaints more often than theyoccur in the general homeownersurvey. This may be becausemanufacturers and retailers some-times refuse to service so-called“cosmetic” complaints.

...Cont. on page 10

swodniw/srooD %16

sllaW %73

mirTroiretnI %43

)gnirevoc(roolF %43

fooR %92

gnilieC %72

gnibmulP %32

)larutcurts(roolF %12

CAVH %12

gnidiSroiretxE %91

gnitrikS %21

noitadnuoF %21

stenibaC %21

secnailppA %11

steltuO %9

draoBylleB %4

mirTroiretxE %4

rotceteDekomS %1

noitalusnI %1

stneV %1

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

7

Binding Arbitration“Ray Crawford, 31, of Carrollton, Ga., spent a frustrating

year trying to get his new manufactured home repaired.Finally he concluded that he’d have to take legal action toforce the company that built it to live up to its commitments.But Crawford discovered that even though the two halves ofthe $72,000 structure didn’t match up properly, he hadunwittingly given up his right to sue.

“To his dismay, a clause buried in the fine print of hispurchase agreement required that any dispute about thepurchase be settled through binding arbitration. Instead ofpaying a simple $65 fee to file a claim at his local court-house, Crawford was told that he’d have to pay $2,000 toinitiate an arbitration process and make a six-hour round-tripto the arbitrator’s office in Addison, Ala. “Before I bought thishome,” he says, “I never heard the word ‘arbitration’—didn’thave a clue what it meant.” Now Crawford is challenging thelegality of the contract provision that bars him from havinghis suit heard before a judge and jury.1”

—Consumer Reports, August 1999

Here in Texas, Tammie Reynolds of Mesquite has beenfighting her retailer since August 2000, calling her purchase“the worse thing ever in my life.” Extensive electrical,installation, and plumbing problems forced her to move outof the home. Unable to get the retailer to make repairs, sheeventually stopped making payments on the home and thefinance company started repossession.

When she tried to sue the retailer to get her moneyback and clear her credit, the retailer forced her intoarbitration. Four hours of arbitration cost her $700, and hercase is still pending. “I don’t have the money and I’mgetting screwed all the way around,” she says. She felt thearbitrators focused too much on finding a minimum settle-ment to which she would agree rather then deciding thecase on its merits.2

Tammie Reynolds and Ray Crawford’s stories are farfrom unique. Virtually all manufactured homes are sold witharbitration agreements. The state association of retailersdistributes a standard form for its members containing theagreement.3 While use of arbitration agreements is growingin all markets, manufactured housing is unique for theprevalence and early adoption of the practice.

Consumers usually don’t have a choice in acceptingthe arbitration agreement. Most don’t argue, but somerefuse to sign. When one consumer protested the agree-ment, the retailer told her arbitration was required.

“I also told him that I would not sign any ArbitrationAgreement,” she wrote. “At this point he said that it wasrequired by the lender. Itold him that I didn’t care.If it was required by thelender, then there wouldbe no loan with thatcompany.

“He said he would callthe lender and do what hecould. He called back andsaid that the Arbitration

Agreement was not required by the lender... it was requiredby the State of Texas. Being a State employee, I knew thatthe State would not require me to give up my right to a JuryTrial and I said so. He said he would call and find out. Healso said that if I could use my position with the State to getout of signing the “State-required” Arbitration Agreement,he wouldn’t mind. At which point I said I would do no suchthing. He called back and said they had contacted theState, and it was indeed not required by the State ofTexas.”4

Arbitrators can tilt towards the business that signs upfor the service. Just like any other business, an arbitrationprovider needs customers in order to survive. Since privatearbitration services depend on the repeat business ofcommercial entities, arbitrators may develop “selectionbias.”

Daniel Weinstein, then the vice chairman and seniorjudicial officer, Judicial Arbitration & Mediation Services Inc.(JAMS), and former superior court judge, conceded thelikelihood of “unconscious as well as the conscious biastoward [the] repeat user.5“ First USA, a credit card com-pany, has reported in court filings that it has arbitratedsome 19,000 disputes, in the process paying the arbitrationfirm over $5 million in fees. First USA lost only 87 of thecases.6

Recommendations:! A fair arbitration process should be voluntary on the partof both parties and not imposed on consumers unilaterally.! Rules governing the process should be clearly disclosed.! Arbitration fees for indigent consumers should be waived.! No arbitration clause should limit an individual’s abilityto join with other similarly harmed consumers in a class-action lawsuit.

Notes1 Consumer Reports August 1999 “The arbitration trap: How

consumers pay for ‘low cost’ justice.”2 Interview, 9/24/02, Tammie Reynolds.3 Arbitration Agreement, Revised 10-10-98.4 TDHCA complaint file MHD 2002000361D, filed 10/18/200.5 Alternative Dispute Resolution: A Roundtable, THE RE-

CORDER, Spring 1993, as footnoted in the Amicus Brief ofConsumers Union to the Supreme Court of the United States in.re. GREEN TREE FINANCIAL CORP.-ALABAMA v. LARKETTARANDOLPH.

6 “Give up Your Right to Sue?”, CONSUMER REPORTS, May2000, p. 8.

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

8

Overall HUD affiliated inspectors have identified electri-cal problems most frequently when monitoring factories,dealers and consumer homes. Inspectors visiting consumerhome sites most often identify problems with the home’sinstallation, floors, and roof. (“Miscellaneous/Regula-tions” on the table refers most often to problems with theinstallation and setup, improper leveling, or problems with theconnections between the units of a multiwide home).

The federal Department of Housing and Urban Develop-ment (HUD) implements and enforces federal law regardingmanufactured homes. Federal law sets out building require-ments (the HUD Code), and also mandates a system offactory, dealer and consumer site inspections. HUD inspectorshave identified a wide range of home problems, depending onthe type of inspection conducted.

The tables on this page and the next describe the tophome construction and installation issues identified by HUDinspectors. The “Specific Problem” tables provide moredetailed information about the top problems identified withinthose general categories. For example, the most commonoverall problem relates to electrical systems, but electricalreceptacles are cited specifically (loose, missing, damaged,defective) 1,586 times.

Roof shingles are the single most frequently identifiedspecific problem. Unlike a site built home, the shingles are notalways installed outdoors where the sun naturally warms andseals them together. In addition, they endure highway speedwinds in transit to the dealership and then to the consumer’shome site.

There are some significant differences between the itemscited at the factory and dealership, and items found at the final

Systems that Fail: HUD inspectors cite electrical, installationand setup, roof, floor, and plumbing fixture problems

(in particular, shingles, electric receptacles, floor decking, bottom board, and tub)

home site—the point where the consumer finally comes intothe process. Electrical problems are frequently cited duringdealer monitoring audits, but consumer site visits more oftenuncover poor installation.

As reported by our consumer complainants and our newhome buyers, doors are a major problem area at the homesite, although less frequently cited overall.

Floors are a major area of concern across the board. Floorproblems, including problems with the decking (these are thekinds of gaps, warps, and squeaks commonly reported byconsumers in our TDHCA complaint files), account for morethan ten percent of problems at the final installation site.

Roofs are also a major problem area. Plant inspectorsfrequently found shingle installation problems, while almost allmissing and damaged shingle citations were found at the site— probably due to damage in transport.

Consumers Union filed a Freedom of Information Actrequest to HUD for this information, which has not been pub-lished since HUD’s 1996 “Ninth Report to Congress on theManufactured Housing Program.” HUD’s 1996 report found thatelectrical, roof, floor and plumbing fixture problems were thosemost often identified by inspectors from 1993 and 1994.1

Today, looking at data from 1995 to February 2002, we findthe same items top the list: electrical, roof, floors and plumbingfixtures. With more detailed information than was previouslypublished by HUD, we further find that there are significantproblems with installation--pointing to the need for a compre-hensive final inspection of every home at the final home site.

1 ”Ninth Report to Congress on the Manufactured HousingProgram” HUD, 1996. p. IV-9 - IV-11.

All Inspection Types All Inspection TypesknaR seirogataCmelborPdaorBfoyrammuS slatoT egatnecreP

1 lacirtcelE 068,6 %8.21

2 snoitalugeR/suoenallecsiM 792,6 %8.11

3 fooR 764,4 %4.8

4 sroolF 853,4 %1.8

5 serutxiF-gnibmulP 774,3 %5.6

6 secnailppA 309,2 %4.5

7 sllaWroiretnI 148,2 %3.5

8 gnidiSroiretxE 556,2 %0.5

9 )gnitaeH(ecanruF 471,2 %1.4

01 puteS 280,2 %9.3

11 srooDroiretxE 230,2 %8.3

21 tneV,etsaW,niarD-gnibmulP 028,1 %4.3

31 swodniW 777,1 %3.3

41 semarF 147,1 %3.3

51 noitubirtsiD-gnibmulP 774,1 %8.2

61 sgnilieC 063,1 %5.2

71 gnirevoCroolF 253,1 %5.2

81 srooDroiretnI 441,1 %1.2

91 sllaWroiretxE 820,1 %9.1

02 yrotalugeR 778 %6.1

227,25%99

knaR epyTmelborPcificepS latoT egatnecreP

1 elgnihS/fooR 767,1 %8.3

2 elcatpeceR/lacirtcelE 685,1 %4.3

3 draoBmottoB/sroolF 265,1 %4.3

4 lyniV/gnidiSroiretxE 805,1 %3.3

5 gnikceD/sroolF 784,1 %2.3

6 lenaPllaW/sllaWroiretnI 940,1 %3.2

7 buT/serutxiF-gnibmulP 878 %9.1

8 pU-teS&noitallatsnI/snoitalugeR/.csiM 928 %8.1

9 )retnI(thgiL/lacirtcelE 357 %6.1

01 eliT/ddraoBgnilieC/sgnilieC 427 %6.1

11 mueloniL/lyniV/gnirevoCroolF 946 %4.1

21 seniLniarD/parT-P/niarD-gnibmulP 716 %3.1

31 ecalperiF/secnailppA 885 %3.1

41 sgnitooF/gnikcolB/puteS 785 %3.1

51 )CW(edommoC/serutxiF-gnibmulP 785 %3.1

61 puteS/puteS 085 %3.1

71 elbaCMN/lacirtcelE 265 %2.1

81 tsioJ/sroolF 855 %2.1

91 retaeHretaW/secnailppA 984 %1.1

02 dooHegnaR/secnailppA 384 %0.1

348,71%5.83

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

9

At the consumer’s home siteinfractions relate to installation

and setup, but also to roofshingles, floors and doors, vinyl

siding, bottom board, andplumbing fixtures.

In the early 70’s, growing concern about the safety and durability ofmobile homes led to a call for minimum building code standards. Moststates had implemented standards, but the industry called for a nationalbuilding code, since factories often build homes for delivery in severalstates. Congress passed a federal building code preempting statecodes, effective in 1976. Manufactured homes are the only type ofhousing built to a national code.

This code, The Mobile Home Construction and Safety StandardsAct (later renamed the Manufactured Home Construction and SafetyStandards Act) is administered by HUD and called the “HUD code.”

The HUD code contains more performance code elements thanmost local building codes. Rather than tell manufacturers how to buildthe home, the code describes how the home must perform under certainstresses. For example, site built codes generally require 2x4 studs inexterior walls supporting a roof to be spaced no more than 24 inchesapart, whereas the HUD-Code specifies the various types of wind andweight loads that a wall must withstand and the maximum deflectionsunder those loads.1 This gives manufacturers more flexibility in manufac-turing techniques, but requires the code to be carefully written to takeinto account all possible desired performance dimensions.

The inspection process for manufactured housing is unique as well.Site built homes typically receive a series of inspections, ranging fromfoundation inspections to inspections of the plumbing and electricalsystems and a final inspection at completion. Manufactured homes aretypically only physically inspected once during construction by a thirdparty. This inspection may occur in the earliest stages of construction orafter the home is completed but before it leaves the factory.2

In reality, in-plant inspectors aren’t inspecting the individual homes,but rather inspecting the manufacturing process to see that it meets thequality assurance plan approved for that facility. Manufacturers areresponsible for monitoring their overall quality through their qualityassurance plan.

These in-plant inspections are not performed byHUD staff. HUD’s manufactured housing office hasa staff of only 8 (as of 2000) to monitor the programfor the entire country.2 The regulatory system makesextensive use of sub-contractors. For example,HUD contracts with many state governments toadminister the HUD code within their states (TDHCAin Texas), but also administers the program directlyin some states.

Additionally, to meet the HUD-code require-ments, manufacturers contract with approved thirdparty inspectors to inspect their plants and approvetheir home designs. In some states these contrac-tors serve at the pleasure of the manufacturer, arepaid by them, and can be fired by them.

This system has inherent conflicts that do notserve the consumer interest. Inspectors should beindependent.

Notes1 “Factory and Site Built Housing: A comparison for

the 21st Century” NAHB Research Center October 1998.pg 53,79.

2 “Consumer Warranty Law, Second Edition”, 2001,National Consumer Law Center, p. 555.

3 “Overview of the Manufactured Housing Program”May 24th, 2001, No Author, provided by NCSBCS.

The HUD Code andInspection System

Inspections at Consumer Home Site

Inspections at Consumer Home Site

knaR melborPdaorBfoyrammuSseirogetaC slatoT egatnecreP

1 snoitalugeR/suoenallecsiM 905,2 %0.21

2 sroolF 971,2 %5.01

3 puteS 450,2 %9.9

4 fooR 245,1 %4.7

5 srooDroiretxE 943,1 %5.6

6 gnidiSroiretxE 602,1 %8.5

7 serutxiF-gnibmulP 991,1 %8.5

8 lacirtcelE 191,1 %7.5

9 sllaWroiretnI 011,1 %3.5

01 gnirevoCroolF 798 %3.4

11 swodniW 238 %0.4

21 )gnitaeH(ecanruF 357 %6.3

31 secnailppA 257 %6.3

41 srooDroiretnI 776 %2.3

51 sgnilieC 246 %1.3

61 tneV,etsaW,niarD-gnibmulP 795 %9.2

71 semarF 424 %0.2

81 sllaWroiretxE 933 %6.1

91 noitubirtsiD-gnibmulP 832 %1.1

02 pmuPtaeH/gninoitidnoCriA 571 %8.0

566,02 %99

knaR netfOtsoMdetiCsmelborPcificepS slatoT egatnecreP

1 /gnikceD/sroolF 159 %6.4

2 /lyniV/gnidiSroiretxE 228 %9.3

3 /pU-teS&noitallatsnI/snoitalugeR/suoenallecsiM 697 %8.3

4 /draoBmottoB/sroolF 827 %5.3

5 /elgnihS/fooR 666 %2.3

6 /sgnitooF/gnikcolB/puteS 585 %8.2

7 /puteS/puteS 975 %8.2

8 /lenaPllaW/sllaWroiretnI 554 %2.2

9 /gnirohcnA/puteS 324 %0.2

01 /mueloniL/lyniV/gnirevoCroolF 104 %9.1

11 /ecapSlwarC/snoitalugeR/suoenallecsiM 473 %8.1

21 /gnileveL/pUteS/snoitalugeR/suoenallecsiM 663 %8.1

31 /eliT/dBglC/sgnilieC 833 %6.1

41 /elcatpeceR/lacirtcelE 323 %6.1

51 /tsioJ/sroolF 992 %4.1

61 /emoHediWitluM-noitcennoCtinU/snoitalugeR/suoenallecsiM 192 %4.1

71 /tcuDrevossorC/)gnitaeH(ecanruF 372 %3.1

81 /stnemtsujdA/srooDroiretxE 462 %3.1

91 /tepraC/gnirevoCroolF 952 %2.1

02 /reyrD/rehsaW/secnailppA 352 %2.1

644,9 %54

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

10

Under most manufactured housing purchase agreements,consumers are responsible for their own site preparation (seepage 18). This site, purchased as a result of a referral from herhome retailer, looked fine to Mrs. J last spring when the retailercompleted the site preparation. But during the hot summers theland in this area splits into cracks measuring over two and a halffeet deep. The cracks are so severe and pervasive that Mrs. Jfeels she couldn’t possibly water her foundation enough toprotect it. She believes the dealer must have known about thisproblem when he suggested this site.

homes now have shingledroofs, but “metal on metal”(metal roofs on metalsiding) are still available inthe lowest cost singlewidemodels. Consumers Unionrecommends consumersspend the extra money toupgrade to a well ventilatedshingle roof with an over-hang.8

Although fewer peoplereport exterior leaks today,moisture remains a prob-lem. Condensation hasbeen a particular problemin Texas. The director ofTDHCA’s ManufacturedHousing Division, BobbieHill, claimed in 1999 tohave seen a pattern ofproblems with walls dete-riorating due to moisture.9

Our sample of more recentcomplaints included severalconsumers who complainedof mold, which is oftenassociated with excessmoisture in a home. Thismay be due to manufactur-ers building homes in thewarm and humid climate ofTexas using the samematerials and designs ascolder and dryer climateselsewhere in the U.S.Moisture can also be causedby poor site preparationleading to water poolingunder the home, as well asby leaks in windows anddoors. The smaller over-hang found on manufac-tured home roofs cancontribute by increasing theamount of water in directcontact with the exteriordoors and windows of thehouse.

Continuing troubleDespite the improve-

ments in structural plumb-

ing and roofs, consumerscontinue to report problemswith doors, windows, trimand finishing. Fully 67percent of all the ownerswe surveyed experiencedproblems with the doors orwindows in their homes—the same share identifiedwith door trouble in the1973 survey.10 Seventeenpercent more manufacturedhome residents performedmajor repairs to their doorsthan site built home resi-dents.11 Controlling for thenumber of rooms and age of

the home, manufacturedhome residents are 49percent more likely to haveperformed major doorrepairs. They report brokenwindows at three times therate of site built homeresidents.12

The continued preva-lence of door and windowproblems could be relatedto the unique foundationsystems in manufacturedhomes. Manufacturedhomes can be set on avariation of foundations,ranging from poured

concrete piers to simpleconcrete blocks. If notinstalled correctly, or ifsettling occurs unevenlydue to poor site prepara-tion, the entire house framemay twist, causing windowsto jam and doors to refuseto shut properly. Someconsumers view this asmerely an inconvenience,while others considered it asafety hazard. Mr. K ofDayton, Texas wrote “Asindicated on decals at-tached to [the] windows,the windows are to be usedfor “Emergency Exit”… Weconsider inoperable win-dows/doors a true emer-gency should there be anytype of disaster.”13

Although manyconsumers don’t realize it,and many dealers offer totake care of sitepreparation, problems thattrace back to poor sitepreparation are not theresponsibility of themanufacturer or the dealer.The consumer is fullyresponsible for sitepreparation in mostcontracts, as detailed below(see p. 18).

Uneven settling of thehome can also lead toproblems with the walls of ahome, the second mostpopular complaint toTDHCA. Many wallcomplaints involved cracks,but some were about entirewallboards popping loose ormoisture getting into thewall. Transportation of thehome on the highway canalso lead to cracks anddamage to the wall. Thewidespread use of pre-patterned vinyl coveredsheetrock in manufactured

Cont. from page 6...

...Cont. on page 12

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

11

Know Your Company’s Complaint HistoryConsumers Union

calculated complaint ratiosfor the largest manufactur-ers selling in Texas.1

Although the retailers orinstallers may be legallyresponsible for some ofthese complaints, manu-facturers have the ability toselect those retailersthrough whom they markettheir product. Manufactur-ers can refuse to sellthrough retailers with ahistory of problems.

The company with thehighest number of com-plaints per home titled wasSouthern Energy homes,also known as Al/Tex, itsTexas subsidiary. SouthernEnergy’s webpagestresses how far they havecome in the last four yearson quality issues. “In 1998,we implemented a newquality and training pro-grams, and our servicedepartments were restruc-tured to ensure a moreefficient process.”2 Despite

these efforts, they top thecomplaint list for the period1998-2002. Southern Energywas issued 2331 titles by thedepartment and received 203complaints over the time period.

Elliott, which sells under thebrand name Solitaire Homes,had the lowest complaint ratio,receiving just 8 complaints on1820 homes sold over the fouryears. Elliott homes is aprivately held company sellingprimarily through its owndealers (23 company lots and 5affiliated lots).3

Multi-section homes weremore likely to receive formalcomplaints than single section.

Complaint ratios mayindicate systematic differencesin the experiences ofhomeowners. Consumersshould not have to file formalcomplaints with a state agencyabout a purchase. Those whodo are already frustrated anddisappointed with their efforts toget satisfaction themselves.

Information about com-plaint patterns is valuable to

new consumers interestedin purchasing a manufac-tured home, but it is notreadily available. We filedan open records requestand the Department levieda significant charge.4

Consumers Unionbelieves that the TexasDepartment of Housing andCommunity Affairs manu-factured housing division(TDHCA) should makeinformation about thecomparative performanceof its licensees freely andeasily available to consum-ers in the form of complaintratios. The Texas Depart-ment of Insurance hasdone this for years, suc-cessfully allowing buyers tofactor consumer satisfac-tion into their purchasedecisions.

! Consumers shouldbe able to order by phoneor download a list oflicensee complaint ratiosand any history of enforce-

ment actions against thecompanies.

Notes1 TDHCA’s complaint

database from July 1998through June of 2002. Thetotal number of titles on newhomes issued to a manufac-turer during the period isdivided by the number ofcomplaints about homesmanufactured by that manu-facturer (including canceledtitles after 1/1/2000). Roughlya third, or 32 percent, of thecomplaints were not about orcould not be matched to aspecific home and thereforewere not considered. Theindustry overall complaint ratiois higher then this chartshows. To make certainmanufacturers could controlthe dealer relationship, weonly limited our calculation tocomplaints about new homes.

2www.soenergyhomes.com/new_energy.htm

3 http://www.solitairehomes.com/4 TDHCA letter to Kevin

Jewell, 9/19/2000, BillingStatement.

Manufacturers with over 1000 homes sold from July 1998 through June 2002. Champion Homes includes Redmond and Crest Ridge.American Homestar includes Guerdon and Oak Creek. Cavalier includes Town and Country and Belmont brands.

Consumer complaints per 100 homes titledSouthern Energy

Pioneer

Cavalier

Patriot

Champion/Redmon

American Homestar

Schult

Silver Creek

Oakwood

Fleetwood

Clayton

Palm Harbor

Skyline

Elliott

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

12

homes can make it difficultto match the pattern inmaking repairs to walls.This can contribute toconsumer dissatisfaction if aproblem does occur.

Consumers also fre-quentlyreportedtrim andfloorcoveringproblemstoTDHCA.Trimincludesthe floor,wall, andceilingmolding, window treat-ments, and other finishingtouches on a new home.Final steps of the trim outare completed after installa-

tion, especially on multisection homes. Complaintsincluded uneven applica-tion of the covering (i.e.carpet, linoleum), poorquality of the material, anddamage such as cuts orstains. Manufacturedhomes come with a range of

quality incarpeting andlinoleum, andthis coveringis often laiddown in thefactory. Infact, linoleummay be laiddown beforethe walls areraised—which means

there are many opportuni-ties for the floor to bedamaged in the construc-tion process. In the drivefor cost efficiency, carpeting

may be stapled rather thanattached with tack strips.This can make restretchingcarpet more difficult.

Trim, floor covering,and minor wall cracking areproblems that may beconsidered “cosmetic” andexcluded from most warran-ties (see warranties, p. 18).Consumers with “cosmetic”complaints are less likely toget redress through thewarranty service processand may remain perma-nently dissatisfied with thehome (see also p.24). Likeproblems due to impropersite preparation, neither themanufacturer nor the dealerare currently held respon-sible for “cosmetic” defi-ciencies in the home, evenif they occur due to poorworkmanship (trim improp-erly attached) or poorquality materials.

Lower consumersatisfaction

Data from the AmericanHousing Survey indicatesthat manufactured homeresidents report slightlylower satisfaction levelsoverall than conventionalhomeowners. Interviewersasked: “On a scale of one toten, how would you rateyour residence as a place tolive?” (10 is best, 1 isworst). On average, manu-factured homeownersstarted about half a pointdown the scale.

We tracked responsesfrom the same home over 4year periods from 1985-1999, and also found theaverage level of satisfactionof mobile home residentsdrops quicker than resi-dents of conventional singlefamily homes. All residentsreport a decline in satisfac-

The Meadows at Trinity Crossing in Northeast Austin is a largeland-lease manufactured home community still under develop-ment. Most people own double wide homes less than three yearsold.

In September, 2002, nearly 100 residents received noticesadvising them that the landowner was getting out of the land-leasebusiness and redeveloping the entire site with conventionalhousing. They must move their homes by February, 2003, at a costof $3,000 to $5,000 dollars. In addition to the cost of the move,moving a home can result in damage ranging from simple wallboard cracks to structural problems.

Across the country, manufactured homeowners are starting totake control of their own communities through cooperativepurchasing. With mandatory notice laws in place in some states,home owners have time to form a nonprofit organization and seekfinancing to make the owner a counter offer. Residents buy theland at its market value like any other purchaser, and rental incomesupports payments on the loan. In the long term, these residentscan better protect their investment in the home and increase itsresale potential.

Data from the AmericanHousing Survey indicatesthat manufactured homeresidents report slightlylower satisfaction levelsoverall than conventionalhomeowners, and ownersatisfaction drops fasterover time.

Cont. from page 10...

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

13

tion over time, but manu-factured home ownerssatisfaction drops onaverage more than twice asfast: -1.7 percent a year vs.–.6 percent a year.

This may be due to thegreater variation in materialquality found in the manu-factured home market.The lower price does notcome solely from efficien-cies in the productionprocess. While some homesare built using similarbuilding materials, carpets,appliances, and fixtures asconventional homes, othersare built using less expen-sive materials to cut costs.The HUD-code allowsbuilders to use a greatervariation of building materi-als than most local codes,and allows them to usethem in different ways. Forexample, the vinyl coveringused over sheetrock inmany manufactured homesmay look like wall paper toconsumers, but is consid-ered a vital “vapor barrier”by the engineer whodesigned the home.

A 1998 National Asso-ciation of Home Buildersreport found “Manufac-tured homes use signifi-cantly different basicmaterials for framing andsheathing walls, floors androofs than conventionalhomes. …In practicallyevery case the usage ofthinner panel products and/or less expensive productalternatives in manufac-tured homes is higher thanin conventional homes.”14

These less expensivematerials—as well as thefailure of “cosmetic” items,doors, windows, andplumbing fixtures—may

contribute to the long termdecline in consumersatisfaction.

We saw anecdotalevidence of disappointmentin our contact with consum-ers. Ms. F. of CorpusChristi wrote us to say: “Myhome is two years old and Ialready wish I could replacethe flooring, kitchencabinets, carpet, showerstall, air conditioning unit,etc….The plumbing is alsoleaking already. In thebeginning I was proud ofthe home and recom-mended it to everyone, nowI tell people to buy any-thing other than what I did.If I bought from the sup-posedly “top of the line”manufacturer, I don’t knowhow other people can standit.”15

On the other hand,consumers who went intothe transaction with limited

expectations may be lessdisappointed. Dustin Elliotof Conroe told us he hadmediocre quality expecta-tions when he bought thehome, and it has performedto his satisfaction.16

Salespeople can con-tribute to this drop inexpectation by “overselling”a home with inadequate

follow-up. Tim Irvine, anattorney with TDHCA toldus “a big problem relates toconsumer expectations.The typical consumer whohas problems started outbeing sold their dreamhome. Once that person[the dealer] got paid theywere less interested intaking care of them... If youare sold your dream andcome up with somethingless – no one will behappy.”17

Service qualityMost manufactured

homes need work upondelivery to the consumer.Defects can occur duringthe manufacturing process,during transit, or setup.After delivery, new manu-factured home ownerstypically submit a “punchlist” of problems to theirretailer. The retailer and

manufacturer then sendservice teams out to repairthe home or complete theinstallation.

Defects will appear inall building processeswhether on site or in afactory, and the best effortsof any manufacturer’squality control programcannot prevent someproblems from slipping

through. Unlike site builthomes, however, manufac-tured homes also undergotremendous stress intransit.

A major component ofproduct quality in thismarket, then, is thecompany’s response whenconsumers report serviceneeds. Consumers forgivedefects if the company actsquickly to fix them. Con-sumers who reportedproblems generally hadlower satisfaction scores,but those with problemswho reported superiorwarranty service reportedsimilar satisfaction levels asthose consumers with noproblems at all.

Unfortunately, for manymanufactured housingconsumers, the warrantyservice system broke down.Mrs. C of San Antonio toldher dealer, “First of all letme tell you that I love mynew house. I have beenvery satisfied with the homeitself… But I am very sad tosay that your service depart-ment leaves a lot to bedesired”18

Clyde Prescott ofNewton, Texas has ownedboth new manufacturedhomes and new site builthomes. He recognizes that“any new construction isgoing to have problems.”But Mr. Prescott toldConsumers Union, “I’ve hadproblems with site builthomes but they’ve alwaysbeen taken care of. Whenthey [the builders] takecare of something you can’tcomplain.” He has not beenable to get satisfactoryrepairs to cracks in theceiling of his new manufac-tured home.19

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

14

Finger PointingThe current industry

structure in Texas and mostof the country splits respon-sibilities for the finalproduct between theretailer, the manufacturer,and the consumer. In somestates, and for used homesin Texas, the installer is anadditional party. (Theretailer is responsible for allnew home installations inTexas.) This can lead tofinger pointing, as manufac-turers and retailers blameeach other for work thatneeds to be done.

Mr. C of Roanoke,Texas wrote: “I contactedthe mobile home dealer.They told me that thefactory was supposed to fixit. …I contacted the factory… But she says that theyare not responsible.” Ms. Hof Bullard, Texas wrote toTDHCA with 16 pages ofunfinished warranty items.She states “I have beentold ‘that is the dealer’sproblem – they have to fixthat.’ How do you expectthe consumer to know whois responsible for what?”

After an installerconstructed her home intorrential rain, Ms. D. ofKountze found leaks,

problems at the marriageline between the sections,and the plastic lining (thebelly board) across thebottom of her home wassagging with water. Servicepeople visited severaltimes, but did not completework to her satisfaction. “Iguess you have to throwyourself down & kick &scream... to get somethingdone. I don’t know becauseI didn’t try that,” she toldher inspector. “I could livewith the carpet. I couldlive with the creak. But, Ican not live without aceiling. Everyone pointstheir finger at someone elsemeantime NOTHING getsdone.”20

This fragmentation ofthe industry is bad forconsumers, because itmakes it difficult to holdanyone accountable for thehome. In a better world,the consumer would be ableto hold one party respon-sible for the entire finalproduct, analogous to agood contract with a generalcontractor for a site builthome.

In Texas, the require-ment that new homeretailers assume responsi-bility for installation ap-pears to have reduced thelevel of blame shiftingbetween retailers andinstallers. We did not seesuch problems in oursample.

Although not possiblein all states due to licensinglaws, Consumer Unionrecommended in 1997 thatconsumers buy directlyfrom manufacturers toavoid this problem.21 InTexas, you can’t “buydirect,” but retailers may be

owned by manufacturers.

Paid beforecompletion

Most consumers knowthat you don’t pay yourcontractor before the workis done—or it might neverget done. But in the manu-factured housing industry,this is often what happens.We reported in “In OverOur Heads” on the practiceof “telephone audits” bylenders. In a telephoneaudit, the lender calls theconsumer to check that thehome has been deliveredand installed. Once deliv-ery is confirmed, the lenderreleases the funds to thedealer. By the time theconsumer has submitted apunch list, the dealer mayhave already been paid infull for the home.

It is not uncommon forpunch lists to run severalpages long and cover dozensof items. Mr. and Mrs. S ofKingsland Texas had a 10page punch list, comprisingof 103 individual problemsthey found after movingin.22 Dealers, faced withthe prospect of paying acontractor to make numer-ous and potentially expen-sive repairs, have an incen-tive to put off the consumerand avoid their warrantyresponsibilities. If thedealer is responsible for therepair, money for that repaircomes directly from theretailer’s profit (likewise forrepairs that are the respon-sibility of the manufac-turer). Many consumersreported difficulty gettingrepair service.

Kristy Howe of Templetold Consumers Union shehad extensive problems

Used Homes:Buyer Beware

Consumers who purchase used manufacturedhomes face additional hurdles to happy homeownership.Retailers generally give only the minimum warranty,limited in Texas to warranting the home is “habitable” for60 days. A home is defined to be “habitable” if it is notdangerous or unsafe, the major systems function, thedoors and windows work, and there are no “substantial”holes to the outside.1

Compounding this limited warranty, retailers are notresponsible by statute for installation, so the consumermay have to deal with a separate company for installation.This provides retailers another opportunity to blame someone else if something goes wrong.

Properly installed used homes may represent a dealfor consumers looking for shelter, as used homes on aretail lot are less expensive than new homes. Recent highrepossession rates have resulted in a flood of usedhomes on the market, driving down prices. But multiplemoves can damage a home and reduce its long termvalue as well.

Retailers say it can be difficult for a consumer to get aloan on a used home, as banks are sometime wary ofwriting loans on collateral of uncertain value. Homes builtbefore 1974 are not built to the HUD code, and may havemore variation in quality. Consumers should have allused homes inspected by an independent professionalbefore purchase.

1 11/2002 TDHCA Licensing Education Class Hand-out.

Cons

umer

s Un

ion

Sout

hwes

t Re

gion

al O

ffice

Pap

er T

iger

Mis

sing

Dra

gon,

Nov

emb

er 2

002

Page

15

getting work done on hernew home. She had numer-ous warranty items, rangingfrom sticky doors to abroken fireplace. Themanager of the dealershipwhere she bought her newhome “told us to forgetabout them doing anythingto fix the problems” andhung up on her severaltimes. Phone calls to themanufacturer received thesame reply. Ms. Howewrote us to say that she andher husband were “tired ofcomplaining and trying toget things fixed. Thewarranty is useless. Wenotified them in writingimmediately, within a fewmonths of moving in. It hasbeen nothing but a hassleand still there are manythings that have not beendone.”23

Betty Jones Piercewrote Consumers Union tosay “Three years past thepurchase date, we still haveunresolved issues, andtotally unsatisfactory workthat has been done on thishome, thatshould havebeen donewhen thehouse wasset up. Myexperi-ences withcustomerservice andrepairtechnicians has beenundependable at best.”24

A consumer fromSulphur Springs, Texaswrote: “Eleven monthshave passed with nothingbut promises that have notyet been met. I feel we

have been put off longenough. I understood poormaintenance workers, slowdelivery, and a host of otherreasons from [the] office topass the buck, but bottomline is we are still waiting.

We havebeen toldat least 10times thateverythingwasorderedand wouldtake about10 days tocome in.

This is eleven monthslater.”25

A Lubbock family sentin a letter they had writtento their dealer. “As of thisdate, not one repair ormissing item on our fax[ed]list has been completed…

I am beginning to feel thatbecause this is not yourhome, you apparently feelthat you do not have aresponsibility to correct the‘problems’ with our newhome in a very timelymatter… We would like tosay ‘we have a brand newhome and that it is nowperfect and we are happy tolive in it!’ That is some-thing we cannot say at thistime.”26

Limited warrantyleaves consumerholding the bagLimited duration of the

warranties (typically 1 year,although some stretchlonger) give additionalincentive for the dealer todrag out service until the

Manufactured homes are built on a steel chassis that is bowed slightly in the middle. Workers build the home on this frame, addingweight and eventually flattening it out.

...Cont. on page 18

I could live with the carpet. Icould live with the creak. But,I cannot live without a ceiling.Everyone points their fingerat someone else meantimeNOTHING gets done.--Kountze, Texas consumer