The Department of Housing and Urban Development has accused the nation's largest builder of mobile homes of violating HUD construction standards in 4,000 units.
Another 76,000 mobile homes manufactured by the company, Fleetwood Enterprises Inc., between 1981 and 1984 -- the same period in which the 4,000 mobile homes were built, may have similar violations, said James Nistler, HUD's deputy assistant secretary for single-family housing.
"In a lot of their units, we believe they violated standards on floors, uplifts and sheer walls," Nistler said. Problems with the sheer walls, which hold outside walls steady, and uplifts, which connect floors with sheer walls, could result in their collapse under a high wind, and the other defect could cause floors to curve, he said.
The violations HUD has cited are "primarily design and engineering situations, and none has been classified as a safety defect. They're not hazards that would require the recall of homes," said David R. Marriner, treasurer and spokesman for Fleetwood. "HUD thinks the way the homes were built is not acceptable. We say it's a matter of interpretation as to what HUD's specifications called for and what we did."
Mobile homes must meet construction standards established by HUD before their purchasers can qualify for loans insured by the Federal Housing Administration. The FHA insurance is important to the industry because many mobile homes are purchased by moderate-income families who could not qualify for a loan without the FHA insurance.
Fleetwood was sent a "preliminary" notice last week, which says HUD believes that it has violated department standards, Nistler said. The company has 20 days to ask for a hearing before the notice becomes a "final determination," meaning the company would be required to notify owners of the 80,000 homes that HUD has determined that there may be defects, he said.
HUD hopes to negotiate an agreement with Fleetwood under which the company would repair the mobile homes when it receives complaints from owners, according to Nistler. Under such an agreement, Fleetwood would not be required to notify purchasers of all the units that defects might exist in their homes, but would have to review its files for any complaints received and then make repairs, he said. The company also would have to make repairs when complaints are received in the future.
If such an agreement is not reached, HUD can order Fleetwood to notify purchasers of the possible defects. But in this case, Fleetwood cannot be required to repair any defects that owners report to the company, Nistler said.
Nistler said HUD and Fleetwood have reached "tentative agreement" on how to handle the wall problems, and he expects to have more meetings with company officials soon. Fleetwood's director of housing manufacturing, Van Pope, said only that "we'll have more dialogue."
Fleetwood made design changes suggested by HUD after the agency found the violations of its standards, Van Pope added.
HUD receives the design and engineering plans of all mobile-home manufacturers, and reviews about 10 percent of them. The possible violations by Fleetwood were discovered in a routine review, according to Nistler. Informal discussions have been going on for almost two years, but HUD eventually "had to subpoena records" from the company, he said.
The 4,000 units studied by HUD were built in Fleetwood's Texas plants. The agency did not have the manpower to investigate the other 80,000 units, according to Nistler.
Fleetwood, which is bigger than the next two-largest manufacturers combined, built 38,000 mobile homes last year, and reported $496 million in sales of the units, Marriner said. The company, which was founded in 1950, operates 25 factories across the country. Its total sales last year were $1.3 billion, with the balance coming from recreational vehicles, he said.
HUD's citation of Fleetwood comes in the midst of a long investigation of the mobile-home industry by the Veterans Administration.
As a result of illegal practices by some manufacturers, "the VA may have overpaid an estimated $3 million on defaulted mobile-home loans" insured by the agency, Robert A. Hincken, the VA's assistance inspector general, told the House subcommittee on housing and memorial affairs at hearings last week.
As a result of the investigation, which was opened in July 1984, four manufacturers so far have pleaded guilty to criminal charges and have agreed to reimburse the VA for its losses, Hincken said in testimony prepared for the subcommittee.
Three of the companies were charged with making illegal rebates to dealers through a practive known as "invoice padding." In this scheme, manufacturers include a rebate -- usually ranging from $1,000 to $2,000 -- in the invoice price without indicating its presence. The added cost of the rebate is passed on to purchasers, the very practice VA rules prohibit.
Hincken told the congressional subcommittee last week that invoice padding is "extensive throughout the mobile-home industry."
The three companies, each of which paid fines, are Guerdon Industries Inc. of Denver, Homestead Homes Inc. of Cordele, Ga., and Scott Housing Systems Inc. of Waycross, Ga. A fourth company, Conner Homes Corp. of Newport, N.C., pleaded guilty to allegations that it charged purchasers for appliances and furniture that never were delivered, and paid a fine.
The VA is "in the final negotiating stages" with five other manufacturers, Hincken told the subcommittee. The five, along with more than 20 other manufacturers being questioned, cannot be named while the investigation is under way, said Ozzie Garza, a VA spokesman.