B-176975, NOV 27, 1972

B-176975, NOV 27, 1972

CIVILIAN PERSONNEL - CHANGE OF STATION - SALE OF RESIDENCE - MORTGAGE GUARANTEE INSURANCE FEE DECISION DENYING CERTIFICATION TO A RECLAIM VOUCHER IN FAVOR OF ROBERT A. QUIST FOR REIMBURSEMENT OF A MORTGAGE GUARANTEE INSURANCE FEE HE WAS REQUIRED TO PAY INCIDENT TO THE SALE OF HIS RESIDENCE AT HIS OLD OFFICIAL STATION IN CONNECTION WITH HIS TRANSFER FROM JUNEAU, ALASKA TO DENVER, COL., AS AN EMPLOYEE OF THE FEDERAL HIGHWAY ADMINISTRATION. A MORTGAGE GUARANTEE INSURANCE FEE IS PART OF THE FINANCE CHARGE UNDER THE MEANING OF THE TRUTH-IN-LENDING ACT, REGULATION Z, SECTION 226.4(A)(7) AND (E). ACCORDINGLY, REIMBURSEMENT OF SUCH A FEE IS PROHIBITED. OMB CIRCULAR NO. A-56, SECTION 4.2D.

TO MR. E. E. SHELHAMER:

WE REFER TO YOUR LETTER OF SEPTEMBER 7, 1972, REFERENCE 08-00.111, BY WHICH YOU REQUEST OUR ADVANCE DECISION WHETHER YOU MAY PROPERLY CERTIFY FOR PAYMENT THE RECLAIM VOUCHER OF ROBERT A. QUIST FOR REIMBURSEMENT OF THE MORTGAGE GUARANTEE INSURANCE FEE HE WAS REQUIRED TO PAY INCIDENT TO THE SALE OF HIS RESIDENCE AT HIS OLD OFFICIAL STATION IN CONNECTION WITH HIS TRANSFER FROM JUNEAU, ALASKA, TO DENVER, COLORADO, AS AN EMPLOYEE OF THE FEDERAL HIGHWAY ADMINISTRATION.

THE MATERIALS SUBMITTED WITH YOUR REQUEST INDICATE THAT IT IS THE CUSTOM IN JUNEAU FOR THE SELLER OF A RESIDENCE TO PAY THE MORTGAGE GUARANTEE INSURANCE FEE WHICH IS REQUIRED IF THE BUYER OBTAINS A LOAN FOR MORE THAN 80 PERCENT OF THE APPRAISED VALUE OF THE RESIDENCE. MR. QUIST STATES THAT THE ONLY OFFERS HE RECEIVED FOR THE PURCHASE OF HIS RESIDENCE INVOLVED 90 PERCENT LOANS AND THAT IN ORDER TO SELL THE RESIDENCE HE ACCEPTED SUCH AN OFFER ALTHOUGH HE WAS AWARE THAT HE WOULD BE REQUIRED TO PAY THE INSURANCE FEE IN QUESTION.

SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, REVISED AUGUST 17, 1971, THE CONTROLLING REGULATION WITH REGARD TO THE REIMBURSEMENT OF EMPLOYEES FOR COSTS INVOLVED IN RESIDENCE TRANSACTIONS PROVIDES IN PART:

"*** THE COST OF A MORTGAGE TITLE POLICY PAID FOR BY AN EMPLOYEE ON A RESIDENCE PURCHASED BY HIM IS REIMBURSABLE BUT COSTS OF OTHER TYPES OF INSURANCE PAID BY HIM, SUCH AS AN OWNER'S TITLE POLICY, A 'RECORD TITLE' POLICY, MORTGAGE INSURANCE, AND INSURANCE AGAINST DAMAGE OR LOSS OF PROPERTY, ARE NOT REIMBURSABLE ITEMS OF EXPENSE. INTEREST ON LOANS, POINTS, AND MORTGAGE DISCOUNTS ARE NOT REIMBURSABLE. NOTWITHSTANDING THE ABOVE, NO FEE, COST, CHARGE, OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, AND REGULATION Z ISSUED PURSUANT THERETO BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. ***"

THE PROVISION OF THAT REGULATION DEALING WITH MORTGAGE INSURANCE APPLIES SPECIFICALLY TO REIMBURSEMENTS IN CONNECTION WITH THE PURCHASE OF A RESIDENCE. ALSO, THE COMPTROLLER GENERAL DECISIONS WHICH YOU CITE (B- 162673, NOVEMBER 13, 1967, AND B-163419, FEBRUARY 26, 1968, COPIES ENCLOSED) INVOLVE THE CLAIMS OF EMPLOYEES FOR REIMBURSEMENT OF MORTGAGE GUARANTEE INSURANCE FEES PAID INCIDENT TO THE PURCHASE OF RESIDENCES UNDER SIMILAR CIRCUMSTANCES. WITH RESPECT TO THE REIMBURSEMENT OF SUCH FEES WHEN PAID BY THE SELLER OF A RESIDENCE THERE IS FOR CONSIDERATION THE PROHIBITION OF REIMBURSING FEES WHICH ARE CONSIDERED A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT. SECTION 226.4 OF REGULATION Z ISSUED UNDER THAT ACT BY THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM PROVIDES IN PERTINENT PART:

"(A) GENERAL RULE. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE AMOUNT OF THE FINANCE CHARGE IN CONNECTION WITH ANY TRANSACTION SHALL BE DETERMINED AS THE SUM OF ALL CHARGES, PAYABLE DIRECTLY OR INDIRECTLY BY THE CUSTOMER, AND IMPOSED DIRECTLY OR INDIRECTLY BY THE CREDITOR AS AN INCIDENT TO OR AS A CONDITION OF THE EXTENSION OF CREDIT, WHETHER PAID OR PAYABLE BY THE CUSTOMER, THE SELLER, OR ANY OTHER PERSON ON BEHALF OF THE CUSTOMER TO THE CREDITOR OR TO A THIRD PARTY, INCLUDING ANY OF THE FOLLOWING TYPES OF CHARGES:

"(7) PREMIUM OR OTHER CHARGE FOR ANY OTHER GUARANTEE OR INSURANCE PROTECTING THE CREDITOR AGAINST THE CUSTOMER'S DEFAULT OR OTHER CREDIT LOSS.

"(E) EXCLUDABLE CHARGES, REAL PROPERTY TRANSACTIONS. THE FOLLOWING CHARGES IN CONNECTION WITH ANY REAL PROPERTY TRANSACTION, PROVIDED THEY ARE BONA FIDE, REASONABLE IN AMOUNT, AND NOT FOR THE PURPOSE OF CIRCUMVENTION OR EVASION OF THIS PART, SHALL NOT BE INCLUDED IN THE FINANCE CHARGE WITH RESPECT TO THAT TRANSACTION:

"(1) FEES OR PREMIUMS FOR TITLE EXAMINATION, ABSTRACT OF TITLE, TITLE INSURANCE, OR SIMILAR PURPOSES AND FOR REQUIRED RELATED PROPERTY SURVEYS.

"(2) FEES FOR PREPARATION OF DEEDS, SETTLEMENT STATEMENTS, OR OTHER DOCUMENTS.

"(3) AMOUNTS REQUIRED TO BE PLACED OR PAID INTO AN ESCROW OR TRUSTEE ACCOUNT FOR FUTURE PAYMENTS OF TAXES, INSURANCE, AND WATER, SEWER, AND LAND RENTS.

"(4) FEES FOR NOTARIZING DEEDS AND OTHER DOCUMENTS.

"(5) APPRAISAL FEES.

"(6) CREDIT REPORTS."

SINCE LOAN GUARANTEE INSURANCE IS PART OF THE FINANCE CHARGE UNDER THE QUOTED PROVISION (SUBSECTION (A)(7)) AND SINCE SUCH FEES ARE NOT SPECIFICALLY EXCLUDED FROM THE FINANCE CHARGE WHEN REAL ESTATE TRANSACTIONS ARE INVOLVED (SUBSECTION (E)), REIMBURSEMENT OF MORTGAGE GUARANTEE INSURANCE FEE TO AN EMPLOYEE IN CONNECTION WITH THE SALE OF HIS RESIDENCE IS NOT AUTHORIZED.

THEREFORE THE VOUCHER, WHICH IS RETURNED HEREWITH, MAY NOT BE CERTIFIED FOR PAYMENT.