TITLE 10.COMMUNITY DEVELOPMENT

Part 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS

Chapter 80. MANUFACTURED HOUSING

The Manufactured Housing Division of the Texas Department of Housing and Community Affairs (the "Department") proposes new §80.129, which will set forth guidelines for the Department to use in determining the appropriate administrative penalty(ies) to pursue when a licensee is believed to have violated the Texas Manufactured Housing Standards Act (the "Act"), the rules (the "Rules") of the Department that implement the Act, or any order issued under the Act or the Rules.

Figure: 10 TAC §80.129(g)--Enforcement grid to determine appropriate administrative penalty(ies).

Bobbie Hill, Executive Director of the Manufactured Housing Division of the Texas Department of Housing and Community Affairs, has determined that for the first five-year period that the section as proposed is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Ms. Hill also has determined that for each year of the first five years the section as proposed is in effect the public benefit as a result of enforcing the section will be: clarification of rules that will increase compliance; improved quality of home installation; and improved gathering of data to facilitate the administration of the Act.

The proposed new §80.129 is expected to have no material economic costs to persons/businesses who are required to comply with the section as proposed.

Comments may be submitted to Bobbie Hill, Executive Director of the Manufactured Housing Division, of the Texas Department of Housing and Community Affairs, P.O. Box 12489, Austin, Texas 78711-2489 or by e-mail at the following address bhill@tdhca.state.tx.us. The deadline for comments is 30 days after publication in the Texas Register .

The new section is proposed under the Texas Manufactured Housing Standards Act, Texas Civil Statutes, Article 5221f, §9, which provides the Department with authority to amend, add, and repeal rules governing the Manufactured Housing Division of the Department and under Texas Government Code, Chapter 2306, §2306.603, which authorizes the director to adopt rules as necessary to administer and enforce the manufactured housing program through the Manufactured Housing Division.

No other statute, code, or article is affected by the proposed new rule.

§80.129.Determinations Regarding the Pursuit of Administrative Penalties and Enforcement Actions.

(a) When the Department has reason to believe that a violation of the Standards Act, these Rules, or an administrative order has occurred, the Department shall determine what, if any, administrative action or actions may be appropriate to see that the purposes of the Standards Act are carried out. In that regard, in order to promote the uniform application of the Standards Act, the Department will follow these guidelines. The only time that the Department will deviate from these guidelines is when with either the Director or the Board determines, for documented bona fide reasons, that some other course of action, consistent with the Standards Act and any other applicable legal requirements would be more appropriate.

(b) As used herein, "dangerous conditions" means any condition which, if present, would constitute an imminent threat to health or safety, and "loss" means actual financial loss or damage, not including exemplary, punitive, special, or consequential damages. "Significant" means significant in relationship to the financial resources of the person who incurs a loss. "Promptly" means within the time prescribed by the Standards Act, these Rules, and any administrative order (including any properly granted extension) or, in the case of a matter that constitutes an imminent threat to health or safety, as quickly as reasonably possible.

(c) Any exceptionally flagrant, willful violation that constitutes an imminent threat to health or safety may be a basis for pursuit of maximum statutory penalties and/or suspension or revocation.

(d) Anytime the record indicates that there is a high likelihood that a licensee's violation is a direct result of a systemic problem, it is appropriate to request the licensee to develop a plan to prevent future occurrences. Undertaking to develop such a system is an appropriate factor to be taken into account in determining what penalty to pursue.

(e) Any and all penalties are IN ADDITION to full compliance with the Standards Act and Rules (i.e., full, prompt corrective action, restitution, or whatever else the Standards Act and rules would have required in the first place). Failure to provide such compliance on a timely basis, as specified in the applicable order, will be deemed to be a violation of the order and serve as a basis for pursuing additional administrative action, including the assessing of additional penalties and the pursuit of suspension or revocation of licensees.

(f) In determining the appropriate amount of a penalty or other action, all relevant factors shall be considered, including, but not limited to: the resources of the licensee and their ability to pay fines, efforts to achieve compliance, the nature and frequency of recurring violations, and monetary impact on consumers.

(g) Enforcement Matrix.

Figure: 10 TAC §80.129(g)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on February 10, 2003.

TRD-200300960

Bobbie Hill

Executive Director, Manufactured Housing Division

Texas Department of Housing and Community Affairs

Earliest possible date of adoption: March 23, 2003

For further information, please call: (512) 475-2206

10 TAC §80.133

The Manufactured Housing Division of the Texas Department of Housing and Community Affairs (the "Department") proposes new §80.133, which will set forth the procedural requirements for the handling of claims that are subject to reimbursement or payment from the Homeowners' Recovery Fund (the "HORF"), administered by the Division of Manufactured Housing, Texas Department of Housing and Community Affairs (the "Department"). The HORF is established under §13A of the Texas Manufactured Housing Standards Act (the "Act").

The adoption of §80.133 is expected to have no material economic costs to persons/businesses who are required to comply with the section as proposed.

No other statute, code, or article is affected by the proposed new rule.

§80.133.Administration of Claims under the Homeowners' Recovery Fund.

(a) The Homeowners' Recovery Fund (the "HORF") is established to reimburse consumers for actual unsatisfied claims against licensed manufacturers, retailers, brokers, and installers for violations of the Standards Act, these rules, the FMHCSS and its implementing regulations, and the Texas Deceptive Trade Practices-Consumer Protection Act. Payments from the HORF are subject to limitations, as set forth in §13A of the Standards Act.

(b) Documentation of a claim by a Licensee who is deemed to be a "consumer" under §14(k) of the Standards Act--When either a manufacturer or a retailer has their license revoked or goes out of business and the party that went out of business or had its license revoked has failed to perform required warranty work on a timely basis, the Director may direct the licensee that is still in business to perform the warranty work. The licensee so directed will be deemed to be a "consumer" under §14(k) of the Standards Act and entitled to be reimbursed from the HORF for the costs of performing such re-assigned warranty work.

(1) The Director, before authorizing any party performing re-assigned warranty work to proceed, will require that an estimate be submitted, itemizing the hourly cost of labor required, the estimated time to complete the work, the itemized costs of any material, equipment, and supplies, and such additional out-of-pocket expenses as the licensee believes it will incur. Overhead costs may be included, not to exceed 20% of the cost of labor and materials. If the required estimate is not submitted and approved prior to the commencement of re-assigned warranty work, the party performing the work may not be reimbursed for that work until the Director has been provided with evidence establishing that the amount billed was justifiable in all respects. The estimate must be on the form prescribed by the Department, properly completed and executed.

(2) An order by the Director authorizing re-assigned warranty work to be performed will specify that:

(A) the amount billed shall not exceed the actual hours required and the actual out-of-pocket expenses incurred;

(B) the licensee should keep complete records, subject to audit by the Department for three years;

(D) the required evidence that the re-assigned warranty work was performed should be supplied to the Department within ten (10) days of completion; and

(E) re-assigned warranty work, once completed, is subject to being re-inspected.

(3) An order re-assigning warranty work and designating the party responsible for the re-assigned warranty work as a "consumer" under §14(k) of the Standards Act becomes final if not appealed within thirty (30) days.

(4) Failure to provide a required estimate in connection with an order to perform re-assigned warranty work, once that order has become final, may serve as grounds for an administrative action against the licensee.

(5) Claims by a consumer who is not a licensee and documentation of HORF claims--when a consumer has a covered claim against a licensee and the licensee has not satisfied the claim, the Department shall take appropriate steps to make sure that the claim is proper and that all reasonable steps to satisfy the claim have been exhausted. In that regard:

(6) The Department, working with the consumer, shall identify the specific section(s) of law or rule that gave rise to the damages;

(7) If the damages arose as a result of a violation Texas Deceptive Trade Practice--Consumer Protection Act, the specific violation must be adequately documented. Acceptable documentation would include a court order finding that such a violation had occurred or the establishing of confirmed facts that would specifically constitute such a violation, along with proof that the court order could not be satisfied. The specific violation must relate directly to the manufactured home or the sale transaction regarding the manufactured home. Tangentially related matters, such as deception in connection with actions as a mortgage broker or real estate broker, are generally not covered and the person responsible should be pursued in the other capacity though appropriate means.

(c) Attorneys' fees are subject to reimbursement from the HORF, subject to certain limitations. Before reimbursing a consumer for attorneys' fees, the Department shall review the fee statement(s), which must indicate the specific services performed, the amount of work required, and the hourly rate(s) charged. Fees not directly relating to efforts to recover the unsatisfied claims which are subject to reimbursement from the HORF will not be reimbursed.

(d) The Department shall require reasonable proof of efforts to collect the damages for which reimbursement from the HORF is sought.

(e) The Department may require the assignment of claims against licensees for any amounts for which payments are made from the HORF. The Department may re-assign any and all such claims to any bonding company or other surety that reimburses the HORF for such payments.

(f) If there is no licensee that can be assigned responsibility for warranty work or corrective action, the Department may enter into agreements with one or more licensees to perform such work after requesting bids from the qualified licensee(s) in the immediate area where the work is to be performed or if, because of the scope and nature of the work, there are no qualified local licensees, with such other licensees as may possess the resources and expertise to submit bids and perform the work. If the only acceptable remedy is the replacement of a home, the Department may negotiate with qualified manufacturers to identify the lowest cost acceptable resolution.

(g) Notification of warranty work orders, inspections, and re-assigned warranty work

(1) When an inspection is to be conducted, other than an initial installation inspection, such as a follow-up installation inspection or a complaint inspection, the Department shall notify each licensee that has been assigned responsibility for warranty items, provided that the licensee still holds an active license, by notifying the licensee, by regular mail to their address of record, as on file with Department. If a party to be notified of an inspection is no longer licensed but has left a mailing address on file with the Department, such party shall be given notice of any such inspection by first class mail to that address.

(2) When warranty work orders are issued, they will be sent to each licensee to whom responsibility has been assigned. They shall be sent to the licensee by regular mail to their address of record, as on file with Department.

(3) If a licensee who has been assigned warranty responsibilities is no longer in business, the Department will, in addition to notifying their surety, notify them of the time and place of the inspection. Such notification to the out-of-business licensee shall be sent to them at their latest business address of record on file with the Department. Unless the out-of-business licensee advises the Department, in writing, on or before the date of the inspection or actually attends the inspection, the Department will re-assign the warranty work, if any, arising from the findings of the inspection to the retailer or manufacturer who is not out-of-business. The party to whom the re-warranty work is re-assigned shall perform the warranty work and shall be a consumer, as provided for in §14(k) of the Standards Act, entitled to be reimbursed from the HORF.

(4) Notification of the surety of an out-of-business or no longer licensed licensee is given in order to afford the surety an opportunity, in accordance with §13A of the Standards Act, to participation in the informal dispute resolution process.

(5) The Director shall consider the views of the surety, if any, as expressed in the informal dispute resolution process. However, the ultimate responsibility to determine how best to proceed rests with the Director, who shall make his or her decision based on a consideration of all relevant factors and the need to protect the health and safety of consumers and to carry out the purposes of the Standards Act.

(6) PROVIDED that an out-of-business licensee has not failed to perform warranty work assigned to it on a timely basis, if the out-of-business licensee notifies the Department, in writing, prior to the inspection or actually attends the inspection and the out-of-business licensee, in the notice or at the inspection, requests that it be allowed to perform any warranty work identified in the inspection, it shall be given a reasonable time, not to exceed forty (40) days or, in the case of a situation which presents a risk of imminent danger to person or property, such shorter period as the Department may specify; and FURTHER PROVIDED, HOWEVER, that if the Director determines that allowing the no longer licensed or out of business licensee to perform such warranty work will pose a threat to the health or safety of a consumer, the Director may deny the no longer licensed or out of business licensee the opportunity and may re-assign the warranty work to the manufacturer or retailer that is still licensed and in business. If the warranty work is not performed within that timeframe and the Department provided proof of the timely and satisfactory completion of such warranty work on or before the tenth (10th) day after it was competed, the Department shall re-assign the warranty work to the retailer or manufacturer that is not out of business.

(7) Once a payment is made from the HORF, the Department shall file a claim under the bond of the party primarily responsible for the unsatisfied claim. In the case of re-assigned warranty work reimbursed by the HORF, the claim shall be against the bond of the party that is no longer in business or whose license has been revoked.

(8) A surety bond issued in connection with a person or entity that is a licensee shall remain in effect with respect to that person or entity, even though the surety bond may be amended to cover one or more additional person or entities or to cover that person operating under one or more different names or identities UNLESS the amendment to the bond specifically terminates the bond with respect to such person or entity.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on February 10, 2003.

TRD-200300961

Bobbie Hill

Executive Director, Manufactured Housing Division

Texas Department of Housing and Community Affairs

Earliest possible date of adoption: March 23, 2003

For further information, please call: (512) 475-2206

10 TAC §80.134

The Manufactured Housing Division of the Texas Department of Housing and Community Affairs (Department) proposes new §80.134, which will describe specific practices which the Department has observed to have taken place and which have been found to be deceptive. In providing details as to such specific practices the proposed rule will provide greater clarity to licensees as to the manner in which they ought to conduct their businesses and it will enhance consumer protection.

The Department is especially interested in comments and suggestions where it is believed that the prohibitions proposed are broader than is necessary and where legitimate practices could be frustrated by the adoption of such rules.

The proposed new §80.134 is expected to have no material economic costs to persons/businesses who are required to comply with the section as proposed.

No other statute, code, or article is affected by the proposed new rule.

§80.134.Deceptive Practices.

(a) The following practices are deemed to be deceptive or abusive practices and are prohibited, except as specifically provided for herein. This section in no way limits or affects whether practices not enumerated or addressed herein are deceptive, abusive, illegal, or the basis for a claim or cause of action.

(1) Interim lending--To sell a manufactured home in a transaction that utilizes interim financing while an application for permanent financing is pending if the seller has any reason to believe that the purchaser will not qualify for the permanent financing; PROVIDED, however, that such a sale may be made if the seller holds in escrow, until approval of the permanent loan, all proceeds and receipts and undertakes to unwind the transaction and refund all monies paid by the consumer, save and except actual out-of-pocket expenses incurred to unaffiliated third parties for appraisals, surveys, preparation of legal documents, credit reports, and courier fees and to pay off the interim loan, together with all interest, costs, and penalties, if any.

(2) Price alterations--To sell a manufactured home at a price in excess of its advertised price or to offer any discount from that price based on whether the sale is for cash or financed.

(3) Role in credit transaction--To have a role in the financing of a manufactured home or any interest, direct or indirect, in a party providing such financing or acting as a third party settlement service provider with respect thereto unless that role is disclosed in writing to the consumer and the consumer is advised, in writing, of the right to obtain financing elsewhere without affecting the contractual terms, including price, relating to the purchase of the manufactured home.

(4) Making any material representation about a manufactured home and failing to evidence it in a document that the purchaser may enforce.

(5) Failure to submit the required forms to enable the purchaser to obtain evidence of good and marketable title within the time required by the Standards Act.

(6) Failure to give §21 notice, formaldehyde notice, or any other required notice.

(7) Misrepresenting the capacity in which a sale is made--If title to the manufactured home is in the name of any party other than the person negotiating and completing the sale transaction or the business on whose behalf he or she is acting, that fact must be disclosed, the identity of the true owner must be disclosed, and the person acting in that capacity must be acting as a licensed broker with authority to negotiate a sale that will result in the delivery of good and marketable title.

(8) Improper WZ or thermal zone installation--Installing a manufactured home in a wind zone or thermal zone for which it is not approved or delivering such a home to such a wind zone or thermal zone for installation by someone else.

(9) Failure to provide a single contractual document that evidences all items to be provided in connection with the manufactured home and, if any such items are to be provided after the fact, specifying the date by when they will be provided and the identity of any party other than the retailer responsible for any such items.

(10) Failure to provide detailed specifications of any item to be delivered or provided in connection with the sale of a manufactured home if the item has a retail value in excess of $250 or, if the consumer requests it, of any value. For example, disclosing that a refrigerator is provided is insufficient. The disclosure must specify the make and model. If>

(11) Asking for or accepting any executed document that has not been completed or altering, without all parties' signed agreement, any executed document.

(12) Knowingly accepting or issuing any check or other instrument appearing on its face to be a bona fide payment but known not to represent good funds.

(13) Accepting from a consumer any deposit or down payment, regardless of what it is called, without first giving the consumer a written statement setting forth:

(A) The amount of that deposit or down payment;

(B) A clear statement as to whether the deposit or down payment is refundable;

(D) Providing a written receipt identifying the name and address of the licensee taking the deposit or down payment and describing the manufactured housing transaction to which it relates.

(14) Negotiating or offering any required refund of less than the full amount the consumer is entitled to receive by law.

(15) Requiring a purchaser to accept delivery of a manufactured home, whether new or used, without giving them an opportunity to inspect the home to make sure that it conforms to their understanding of what their contract for purchase had specified. When the purchaser signs a document acknowledging that the home which has been delivered is, in fact, the home that they had agreed to purchase, the sale becomes final, but this in no way affects the operation of any warranty required by law or granted contractually or affects or abridges any rights or obligations of either of the parties to the transaction.

(16) Failing to disclose in advance, in writing, if the licensee or any person acting on their behalf is acting in any capacity as a lender, mortgage broker or loan officer, real estate broker or agent, or provider of any settlement service in connection with a loan to finance the purchase of a manufactured home.

(17) Failing to identify one's self as a licensee by displaying the type and license number on a business card or advertisement.

(b) Other disclosures: On the sale of a used home, the retailer or broker must provide the purchaser with a disclosure advising the consumer either that they will be responsible for the installation (which will have a written warranty of not less than one year) or, if they will not be installing the home, a statement that they will not be installing the home and therefore will not be providing any warranty as to installation.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on February 10, 2003.

TRD-200300962

Bobbie Hill

Executive Director, Manufactured Housing Division

Texas Department of Housing and Community Affairs

Earliest possible date of adoption: March 23, 2003

For further information, please call: (512) 475-2206