After fixing several other issues I noticed that people are naked and my items and clothing are all unequipped. I did not want to install any nudity mod and I am unsure what mod is causing this. Any help on figuring out what mod this is and removing it would be greatly appreciated.

Here is my load order...

Oblivion.esm
All Natural Base.esm
Francesco's Leveled Creatures-Items Mod.esm
Francesco's Optional New Items Add-On.esm
Oscuro's_Oblivion_Overhaul.esm
Mart's Monster Mod.esm
TamrielTravellers.esm
FCOM_Convergence.esm
Better Cities Resources.esm
HorseCombatMaster.esm
HrmnsOblivionScriptOptimizationv1.0.esp
Unofficial Oblivion Patch.esp
DLCShiveringIsles.esp
Unofficial Shivering Isles Patch.esp
Better Cities .esp
FCOM_Francescos.esp
FCOM_FrancescosItemsAddOn.esp
FCOM_FrancescosNamedBosses.esp
All Natural.esp
All Natural - SI.esp
Immersive Interiors.esp
Immersive Interiors - Lights Addon.esp
All Natural - Real Lights.esp
personality_idles4.esp
P1DrobesOver.esp
ReneerVariedNPCsMod.esp
Enhanced Economy.esp
moDem's City Life.esp
DropLitTorchOBSE.esp
P1DlookHereYou.esp
Streamline 3.1.esp
Map Marker Overhaul.esp
Map Marker Overhaul - SI additions.esp
Expanded Hotkeys and Spell Delete V2.esp
Rope Ladders v1.esp
Oscuro's_Oblivion_Overhaul.esp
OOO-Water_Weeds.esp
Mart's Monster Mod - Additional Enemy NPC Vars.esp
FCOM_Convergence.esp
FCOM_RealSwords.esp
FCOM_DurabilityAndDamage.esp
Mart's Monster Mod - More Wilderness Life.esp
FCOM_SaferRoads.esp
FCOM_LessRats.esp
Mart's Monster Mod - Extra Wounding.esp
Mart's Monster Mod - Looting NPCs & Creatures.esp
Mart's Monster Mod - Safer Quest Locations.esp
Mart's Monster Mod - Dungeons of MMM.esp
Mart's Monster Mod - Hunting & Crafting.esp
Mart's Monster Mod - Farm Animals.esp
Mart's Monster Mod - Diverse WaterLife.esp
Mart's Monster Mod - Slof Horses Complete.esp
TamrielTravellerAdvscript.esp
TamrielTravellers4OOO.esp
TamrielTravellersItemsnpc.esp
TamrielTravellersItemsVendor.esp
ShiveringIsleTravellers.esp
ShiveringIsleTravellersFriendlyFactions.esp
FCOM_TamrielTravelers.esp
FCOM_DiverseGuardUnity.esp
FCOM_HungersUnitySI.esp
FCOM_FriendlierFactions.esp
FCOM_MoreRandomSpawns.esp
FCOM_MoreRandomItems.esp
Mart's Monster Mod - Shivering Isles.esp
OOO-WaterFish.esp
Scribe Supplies.esp
VaultsofCyrodiilBC.esp
Knights.esp
FCOM_Knights.esp
Harvest [Flora].esp
Harvest [Flora] - Shivering Isles.esp
Dungeon Actors Have Torches 1.6 CT.esp
Exterior Actors Have Torches 1.3 CT.esp
GP_Lockpicks.esp
P1DkeyChain.esp
PersuasionOverhaul_LITE.esp
RenCorpseMod.esp
ScriptIcon_Replacer.esp
RealisticForceMedium.esp
RealisticMagicForceMedium.esp
RealSleepExtended.esp
Addendum - Vampires.esp
SupremeMagicka.esp
SM_ShiveringIsles.esp
SM_OOO.esp
SM_MMM.esp
SM_EnchantStaff.esp
SM_UnlockSpells.esp
SM_Scrolls.esp
MidasSpells.esp
Enchantment Enhanced.esp
EnchantmentRestore.esp
EnchantmentRestore_Wells.esp
StealthOverhaul.esp
Stealth Entrances v1.esp
RenGuardOverhaul.esp
Denock Arrows.esp
Deadly Reflex 6 - Timed Block with no damage or durability changes.esp
Mounted_Spellcasting_Deadly_Reflex_Compatible.esp
DRSplatter.esp
Francesco's Slower skills x1.5.esp
bgBalancingEVCore.esp
Better Cities Full.esp
Better Cities - VWD of the IC.esp
Better Imperial City.esp
Better Imperial City FPS Patch.esp
Better Cities Full FPS Patch.esp
Francesco's 10 days respawn time - 1-20 day lenght rescale.esp
P1DshieldNoGlow.esp
FCOM_Archery.esp
Argonians and Khajiit Lose Tails no More Script.esp
DeadlyReflex 6 - Combat Moves.esp
Expanded Hotkeys and Spell Delete manual.esp
All armor and SE armor playable.esp
SkillsOver100.esp
Duke Patricks - BASIC Script Effect Silencer NIF REMOVED.esp
Bashed Patch, 0.esp

Deadly Reflex had a problem at one time. Uninstall DR, make sure you have the latest files, and then re-install DR.
Or, check in the DR thread. There may be a "fix" you can do without uninstalling / reinstalling. I don't know as I do not use DR.

Start with mods that are related to the problem. In your case, try deactivaing VariedNPCsMod and see what happens. If that fails, are you quite sure you imported everything correctly in your Bashed Patch? Random nudity usually indicates missing meshes and/or textures.

It's not Varied NPCs. It's Deadly Reflex, and I believe the latest version had that "feature" removed.

I will try updating Deadly Reflex again.

People are still naked for me...

Go to Oblivion\Data\meshes\Characters\_Male\ and delete femaleupperbody.nif, femalelowerbody.nif, lowerbody.nif, and upperbody.nif.

Isn't there a known Frans issue where bandits would start appearing naked and their loot consisted of calipers?

I've never had it myself, but here it can be a pain. So who is showing up as naked - everyone or only enemy NPCs in the tamriel worldspace? Are you seeing a lot of calipers?

If it persists without DR active then I'd dive into the Frans readme for the answer for that. Not sure where it is.

No, he's not talking naked as in nothing equipped, he's talking naked as in birthday suit style.

Deadly Reflex 6 accidentally packaged a body replacer. I won't reiterate the fix instructions, since that's already well covered here.

Yep it's DR6 -- and updating it will not do anything since it adds the body mod by mistake and since they are direct replacement textures will not be removed by uninstalling it or updating to a new version. Follow Farmer.Bobathon's instructions to remove them !

I just manually went into the meshes folder and removed the upperbody and lowerbody nifs for male and female and that resolved it.