B-121624, AUGUST 24, 1960, 40 COMP. GEN. 114

B-121624: Aug 24, 1960

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APPROPRIATIONS - FEDERAL HOUSING ADMINISTRATION - APPRAISERS' AND INSPECTORS' FEES - NONADMINISTRATIVE EXPENSES EVEN THOUGH THE APPRAISERS' AND INSPECTORS' FEES PAID BY MORTGAGEES PROCESSING HOME MORTGAGE INSURANCE APPLICATIONS UNDER THE CERTIFIED AGENCY PROGRAM OF THE FEDERAL HOUSING ADMINISTRATION ARE MATTERS BETWEEN THE MORTGAGEE. THE FEDERAL HOUSING ADMINISTRATION IS NOT INVOLVED. IS APPLICABLE TO APPRAISALS AND INSPECTIONS UNDER THE CERTIFIED AGENCY PROGRAM OF THE FEDERAL HOUSING ADMINISTRATION. THE FEDERAL HOUSING ADMINISTRATION HAS USED AS PART OF ITS PROCESSING ARRANGEMENTS A FEE APPRAISAL SYSTEM UNDER WHICH APPLICATIONS FOR MORTGAGE INSURANCE ON EXISTING HOMES HAVE BEEN ASSIGNED TO FEE APPRAISERS IN THOSE CASES WHICH FHA COULD NOT ITSELF PROCESS WITH REASONABLE PROMPTNESS.

B-121624, AUGUST 24, 1960, 40 COMP. GEN. 114

APPROPRIATIONS - FEDERAL HOUSING ADMINISTRATION - APPRAISERS' AND INSPECTORS' FEES - NONADMINISTRATIVE EXPENSES EVEN THOUGH THE APPRAISERS' AND INSPECTORS' FEES PAID BY MORTGAGEES PROCESSING HOME MORTGAGE INSURANCE APPLICATIONS UNDER THE CERTIFIED AGENCY PROGRAM OF THE FEDERAL HOUSING ADMINISTRATION ARE MATTERS BETWEEN THE MORTGAGEE, MORTGAGOR, AND THE APPRAISERS AND INSPECTORS, AND THE FEDERAL HOUSING ADMINISTRATION IS NOT INVOLVED, THERE BEING NO REFUND OF A FEDERAL HOUSING ADMINISTRATION FEE, SUCH FEES MUST BE REGARDED AS NONADMINISTRATIVE EXPENSES TO BE CHARGED AGAINST THE LIMITATION IN TITLE II OF THE INDEPENDENT OFFICE APPROPRIATION ACT, 1961, 74 STAT. 425, AND, IN VIEW OF THE CONGRESSIONAL INTENT THAT ACTUAL FEES BE CHARGED TO THE LIMITATION, A CHARGE BASED ON ESTIMATED COSTS MAY NOT BE AUTHORIZED.

TO THE ADMINISTRATOR HOUSING AND HOME FINANCE AGENCY, AUGUST 24, 1960:

YOUR LETTER OF JULY 29, 1960, REQUESTS OUR OPINION AS TO WHETHER THE NONADMINISTRATIVE EXPENSE LIMITATION CONTAINED IN THE INDEPENDENT OFFICES APPROPRIATION ACT, 1961, 74 STAT. 425, IS APPLICABLE TO APPRAISALS AND INSPECTIONS UNDER THE CERTIFIED AGENCY PROGRAM OF THE FEDERAL HOUSING ADMINISTRATION.

TITLE II OF THE ACT PROVIDES UNDER THE HEADING,"1HOUSING AND HOME FINANCE AGENCY, LIMITATION ON ADMINISTRATIVE AND NONADMINISTRATIVE EXPENSES, FEDERAL HOUSING ADMINISTRATION: "

FOR ADMINISTRATIVE EXPENSES IN CARRYING OUT DUTIES IMPOSED BY OR PURSUANT TO LAW, NOT TO EXCEED $8,550,000 OF THE VARIOUS FUNDS OF THE FEDERAL HOUSING ADMINISTRATION SHALL BE AVAILABLE, IN ACCORDANCE WITH THE NATIONAL HOUSING ACT, AS AMENDED (12 U.S.C. 1701) * * * PROVIDED FURTHER, THAT NONADMINISTRATIVE EXPENSES OF ALL KINDS REGARDLESS OF SOURCE CLASSIFIED BY SECTION 2 OF PUBLIC LAW 387, APPROVED OCTOBER 25, 1949, INCLUDING ALL APPRAISAL FEES REGARDLESS OF SOURCE OR METHOD OF FINANCING SHALL NOT EXCEED $50,000,000.

THE FEDERAL HOUSING ADMINISTRATION HAS USED AS PART OF ITS PROCESSING ARRANGEMENTS A FEE APPRAISAL SYSTEM UNDER WHICH APPLICATIONS FOR MORTGAGE INSURANCE ON EXISTING HOMES HAVE BEEN ASSIGNED TO FEE APPRAISERS IN THOSE CASES WHICH FHA COULD NOT ITSELF PROCESS WITH REASONABLE PROMPTNESS. THESE CASES FHA REFUNDED TO THE MORTGAGEE THE FEE WHICH THE MORTGAGEE HAD COLLECTED FROM THE MORTGAGOR AND PAID TO FHA FOR PROCESSING ITS APPLICATION. THE MORTGAGEE PAID, TO THE FEE APPRAISER TO WHOM THE CASE WAS ASSIGNED, AN APPRAISAL FEE IN THE AMOUNT OF THE REFUND. YOU POINT OUT THAT IN THESE CASES OF REGULAR APPLICATIONS FILED WITH FHA IN THE USUAL COURSE OF BUSINESS THERE IS NO DOUBT THAT THE PROVISO QUOTED ABOVE IS APPLICABLE, THE FEE REFUNDED BEING CHARGED AS AN EXPENSE. HOWEVER, YOU ARE IN DOUBT AS TO WHETHER YOUR CERTIFIED AGENCY PROGRAM IS TO BE CONSIDERED COMPARABLE TO THE FEE APPRAISAL SYSTEM SO FAR AS THE LIMITATION IS CONCERNED.

UNDER THE CERTIFIED AGENCY PROGRAM, FHA HAS AUTHORIZED MORTGAGEES IN CERTAIN LOCATIONS TO ACT AS FHA AGENTS IN PROCESSING HOME MORTGAGE INSURANCE APPLICATIONS AND ISSUING COMMITMENTS. THE MORTGAGEE IN ITS PROCESSING USES FEE APPRAISERS AND INSPECTORS. THE CASES ARE FILED DIRECTLY WITH AND PROCESSED BY THE MORTGAGEE. THERE IS NO REFUND OF AN FHA FEE WHICH MAY BE TREATED AS AN EXPENSE NOR IS FHA IN ANY WAY INVOLVED IN THE DETERMINATION OR PAYMENT OF THE FEES WHICH ARE MATTERS BETWEEN THE MORTGAGEE, THE MORTGAGOR, AND THE APPRAISERS AND INSPECTORS. YOU POINT OUT THAT IN SOME CASES FHA IS NOT EVEN AWARE OF THE AMOUNT OF THE FEES PAID BY THE MORTGAGEE.

YOU STATE THAT SHOULD WE RULE THE STATUTORY LIMITATION AS BEING APPLICABLE TO THE CERTIFIED AGENCY PROGRAM, NOTWITHSTANDING THE NATURE OF THE PROGRAM, THE RESULT WILL BE TO EFFECT A PUTATIVE CHARGE REDUCING THE AVAILABILITY OF THE LIMITATION SINCE THERE IS NO FHA EXPENSE WHICH CAN BE ACCOUNTED AS SUCH AGAINST THE LIMITATION. YOU STATE FURTHER THAT IN THE EVENT THE LIMITATION IS APPLICABLE, FHA IS CONSIDERING ESTABLISHING A PUTATIVE CHARGE AGAINST THE NONADMINISTRATIVE EXPENSE LIMITATION EQUIVALENT TO WHAT IT WOULD COST FHA TO PROCURE A FEE APPRAISAL AND INSPECT THE PROPERTY WITH ITS OWN STAFF, AND YOU REQUEST OUR OPINION AS TO WHETHER SUCH A PROCEDURE WOULD MEET THE REQUIREMENTS OF THE STATUTE.

AS RECOGNIZED IN YOUR LETTER, THE COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, IN ITS REPORT ON THE INDEPENDENT OFFICES APPROPRIATION BILL, 1961, REPORT NO. 1519, STATES WITH RESPECT TO THE NONADMINISTRATIVE EXPENSE LIMITATION LANGUAGE USED IN THE ACT THAT:

LANGUAGE IS ALSO INCLUDED IN THE BILL THIS YEAR MAKING IT CLEAR THAT ALL APPRAISAL AND OTHER FEES USED IN ADMINISTERING THE PROGRAMS, WHETHER PAID BY THE FEDERAL HOUSING ADMINISTRATION OR THE MORTGAGEE, ARE TO BE INCLUDED WITHIN THE NONADMINISTRATIVE EXPENSES LIMITATIONS SO AS TO PRESENT A TRUE ACCOUNTING OF THE AGENCY'S OPERATIONS. THERE IS ADEQUATE LATITUDE WITHIN THE NONADMINISTRATIVE EXPENSES ALLOWED IN THE BILL TO INCLUDE SUCH FEES ON THE BASIS OF WORKLOAD NOW ANTICIPATED AND PAST COST EXPERIENCE FOR ADMINISTERING THE SAME AMOUNT OF WORK. (ITALICS SUPPLIED.)

THE LANGUAGE OF THE STATUTE ITSELF WOULD APPEAR TO REQUIRE APPLICATION OF THE LIMITATION TO THE CERTIFIED AGENCY PROGRAM AND WHEN READ TOGETHER WITH THE EXPLANATION THEREOF CONTAINED IN THE HOUSE REPORT THERE WOULD NOT APPEAR TO BE ANY ROOM FOR DOUBT ON THAT SCORE. MOREOVER, IN SENATE HEARINGS ON THE INDEPENDENT OFFICES APPROPRIATIONS ACT, 1961, DURING WHICH THE EFFECT OF THE LIMITATION LANGUAGE AS PASSED BY THE HOUSE AND FINALLY ENACTED WAS CONSIDERED, REPRESENTATIVES OF YOUR AGENCY URGED THAT THE LIMITATION BE REMOVED BECAUSE FEE APPRAISAL SERVICE WOULD BECOME CUMBERSOME AND EXPENSIVE TO ADMINISTER, ESPECIALLY IN THE CERTIFIED AGENCY PROGRAM, IF MADE SUBJECT TO BUDGET LIMITATION. SEE PAGE 583 OF HEARINGS BEFORE THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, UNITED STATES SENATE, 86TH CONGRESS, 2D SESSION, ON H.R. 11776. AND AT PAGE 585 OF THE HEARINGS THE FOLLOWING STATEMENT IS MADE IN JUSTIFICATION OF THE REQUEST FOR DELETION OF THE NONADMINISTRATIVE LIMITATION:

THE HOUSE ALLOWED THE $50 MILLION NONADMINISTRATIVE EXPENSE LIMITATION BUT REQUIRED ABSORPTION WITHIN THAT LIMITATION OF THE FEE APPRAISALS AND CERTIFIED AGENCY PROGRAM CASES ESTIMATED AT $3,840,000 * * * (ITALICS SUPPLIED.)

IT IS THUS CLEAR THAT YOUR AGENCY, AS WELL AS THE CONGRESS, UNDERSTOOD THE LANGUAGE OF THE LIMITATION AS REQUIRING INCLUSION OF THE CERTIFIED AGENCY PROGRAM. NOR COULD WE FIND ANY BASIS FOR ATTACHING A DIFFERENT IMPORT TO THE LANGUAGE USED.

ACCORDINGLY, SINCE APPRAISAL AND INSPECTION SERVICES ARE CLASSIFIED BY PUBLIC LAW 387, 81ST CONGRESS AS NONADMINISTRATIVE EXPENSES, WE MUST CONCLUDE THAT FEES FOR SUCH SERVICES PAID UNDER THE CERTIFIED AGENCY PROGRAM ADMINISTERED BY THE FEDERAL HOUSING ADMINISTRATION OF A PUTATIVE CHARGE AGAINST THE LIMITATION ON THE BASIS OF ESTIMATED COSTS, THE ACT AND THE ITALICIZED PORTION OF THE ABOVE QUOTE FROM THE HOUSE COMMITTEE REPORT REQUIRE THAT THE ACTUAL FEES PAID BE CHARGED.