The U.S. Department of Housing and Urban Development Secretary has reached a settlement with a North Carolina mobile home producer, demanding it correct construction and safety violations in 275 homes, pay a civil penalty of up to $300,000 and inspect about 600 more homes for possible additional violations.

The settlement ends a year-long investigation by HUD of Southern Energy Homes of North Carolina, Inc., under the National Manufactured Housing Construction and Safety Standards Act.

HUD regulates construction and safety standards for manufactured housing under the 1974 law. The Act requires manufacturers to notify homeowners and make corrections to manufactured homes if they have certain kinds of defects or imminent safety hazards.

"It’s important for families to know that HUD will enforce the law to protect them from substandard manufactured homes," a HUD spokesman said. "Buying a manufactured home should be the fulfillment of the American Dream of homeownership -- not the beginning of a nightmare caused by a poorly built or unsafe home."

HUD’s investigation of 275 manufactured homes produced by Southern Energy between 1995 and early 1998 found numerous violations of HUD construction and safety standards, including: ceiling mirrors that may fall; loose or faulty wiring in electrical outlets, furnaces, range hoods, and panel and junction boxes; plumbing vents that did not go through roofs; walls that were not properly glued to studs, and vinyl siding that was improperly installed.

HUD’s investigation also found that Southern Energy failed to comply with the consumer notification and defect correction requirements of the National Manufactured Housing Construction and Safety Standards Act.

While not admitting any liability, Southern Energy agreed to enter into the settlement with HUD and to work with the Department to solve problems found in the company’s homes.

Under the terms of the settlement Southern Energy will correct the defects in the 275 homes identified by HUD. Southern Energy also will inspect approximately 600 additional homes to identify classes of homes with serious problems. All such problems will be corrected within 60 days. Southern will also extend warranties for one year on homes produced between November 1995 and March 1998 in its Albermarle, NC Imperial Homes factory.

Southern Energy has agreed to pay HUD a civil penalty of $300,000 pursuant to the civil penalty provisions in the federal law. However, part of the penalty can be waived if HUD determines that the company has complied with the terms of the settlement.

In addition, Southern Energy agreed to implement a computerized system for tracking problems in its homes, to provide new training for quality control and customer service personnel and service contractors, and to use a private inspection agency to evaluate its quality assurance program and review class determinations of problems in Southern Energy’s Imperial Homes factory.

Southern Energy announced in a letter to consumers: "…some homes produced at our Albemarle, North Carolina plant may exhibit certain performance problems that our in-factory quality control system failed to detect. As a result, we are working with both our customers and with the Department of Housing and Urban Development to find any such problems and to get them resolved."