B-131493, MAY 28, 1957

B-131493: May 28, 1957

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IT IS EXPLAINED IN THE ASSISTANT SECRETARY'S LETTER THAT THE PROBLEM OF FORMALLY NOTIFYING THE FHA OF TERMINATION OF A MEMBER'S ENTITLEMENT OF PAYMENTS FOR THE MEMBER BY THE NAVY HAS RESULTED IN A DIFFERENCE OF OPINION BETWEEN THE FHA AND THE NAVY REGARDING THE AMOUNT OF PREMIUM PAYMENTS TO FHA OR PREMIUM REFUNDS DUE THE NAVY. IT IS STATED THAT FHA MAINTAINS THAT ANY LATE NOTIFICATION OF TERMINATION OF A SERVICE MEMBER'S ENTITLEMENT TO PREMIUM PAYMENTS BY THE SERVICES RESULTS IN A DELAYED NOTIFICATION TO THE FINANCING INSTITUTION. THE POSITION OF THE NAVY IS STATED TO BE THAT ANY PAYMENTS MADE OR RETAINED BY FHA AFTER THE DATE OF A MEMBER'S TERMINATION OF ELIGIBILITY ARE IN THE NATURE OF OVERPAYMENTS.

B-131493, MAY 28, 1957

TO THE SECRETARY OF THE NAVY:

ON APRIL 12, 1957, THE ASSISTANT SECRETARY OF THE NAVY (FINANCIAL MANAGEMENT), FORWARDED FOR OUR CONSIDERATION A LETTER FROM THE DISBURSING OFFICER, SPECIAL PAYMENTS DEPARTMENT, NAVY FINANCE CENTER, DATED FEBRUARY 7, 1957, WITH ENCLOSURES, REQUESTING DECISION AS TO THE PROPRIETY OF PAYMENT OF FEDERAL HOUSING ADMINISTRATION MORTGAGE INSURANCE PREMIUMS UNDER SECTION 124 OF THE HOUSING ACT OF 1954, 68 STAT. 603, IN THE CASES OF THOMAS I. NEWSOME, 261 94 30, PNAC, UNITED STATES NAVY (RETIRED), AND RALPH I. RICKETTS, 994 52 75, UNITED STATES NAVY. INSURANCE PREMIUMS HERE INVOLVED COVER, IN RESPECT TO NEWSOME, A PERIOD SUBSEQUENT TO HIS BEING PLACED ON THE RETIRED LIST, AND IN RESPECT TO RICKETTS, A PERIOD SUBSEQUENT TO HIS DISCHARGE FROM THE SERVICE.

IN FORWARDING THE REQUEST FOR AN ADVANCE DECISION, IT IS EXPLAINED IN THE ASSISTANT SECRETARY'S LETTER THAT THE PROBLEM OF FORMALLY NOTIFYING THE FHA OF TERMINATION OF A MEMBER'S ENTITLEMENT OF PAYMENTS FOR THE MEMBER BY THE NAVY HAS RESULTED IN A DIFFERENCE OF OPINION BETWEEN THE FHA AND THE NAVY REGARDING THE AMOUNT OF PREMIUM PAYMENTS TO FHA OR PREMIUM REFUNDS DUE THE NAVY. IT IS STATED THAT FHA MAINTAINS THAT ANY LATE NOTIFICATION OF TERMINATION OF A SERVICE MEMBER'S ENTITLEMENT TO PREMIUM PAYMENTS BY THE SERVICES RESULTS IN A DELAYED NOTIFICATION TO THE FINANCING INSTITUTION, THAT IN TURN REQUIRES AN UNDESIRABLE RETROACTIVE BILLING TO THE MEMBER OR NEW PURCHASER WHICH HAS IN SOME CASES AND MAY IN THE FUTURE LEAD TO A RELUCTANCE BY FINANCIAL INVESTORS TO CONTINUE FINANCING OF SERVICE MEMBERS UNDER THE LOAN PROGRAM. THE POSITION OF THE NAVY IS STATED TO BE THAT ANY PAYMENTS MADE OR RETAINED BY FHA AFTER THE DATE OF A MEMBER'S TERMINATION OF ELIGIBILITY ARE IN THE NATURE OF OVERPAYMENTS. UNDER ARRANGEMENTS AGREED UPON BETWEEN REPRESENTATIVES OF THE FHA, OFFICE OF THE SECRETARY OF DEFENSE, AND THE ARMED SERVICES, AT A MEETING HELD JANUARY 11, 1957, FHA AGREED TO ALLOW THE SERVICES UP TO 30 DAYS AFTER THE MONTH IN WHICH A MEMBER'S TERMINATION OCCURS TO NOTIFY FHA OF SUCH TERMINATION IN ORDER TO RECEIVE THE FULL REFUND FROM THE FIRST OF THE MONTH FOLLOWING THE MONTH OF MEMBER'S TERMINATION OF ENTITLEMENT. IT IS STATED THAT ANY FURTHER MODIFICATION OF THE PRESENT AGREEMENT IS CONTINGENT UPON OUR DECISION ON THE CASES OUTLINED BELOW.

IT APPEARS THAT A CERTIFICATE OF ELIGIBILITY TO OBTAIN ANFHA INSURED MORTGAGE WAS DULY ISSUED UNDER THE PROVISIONS OF SECTION 124 OF THE ACT BY THE DEPARTMENT OF THE NAVY ON OCTOBER 24, 1955, FOR THOMAS I. NEWSOME. THE CERTIFICATE WAS ENDORSED FOR INSURANCE BY THE FHA ON MARCH 23, 1956. IN THE MEANTIME, HOWEVER, NEWSOME WAS PLACED ON THE RETIRED LIST EFFECTIVE MARCH 5, 1956. A CERTIFICATE OF TERMINATION WAS FORWARDED TO THE FHA BY THE NAVY FINANCE CENTER ON JUNE 20, 1956. UNDER AN ARRANGEMENT BETWEEN THE COMMISSIONER, FHA, AND THE SECRETARY OF DEFENSE, AS SET FORTH IN LETTER DATED OCTOBER 21, 1954, THE RESPONSIBILITY FOR THE PAYMENT OF ALL PREMIUMS DUE UNDER SERVICEMEN'S INSURED MORTGAGE BY THE DESIGNATED OFFICERS OF THE DEPARTMENT OF DEFENSE CONTINUES UNTIL THE FIRST DAY OF THE MONTH FOLLOWING THE RECEIPT BY THE FHA OF A CERTIFICATE OF TERMINATION. PURSUANT THERETO, FHA REQUESTED PAYMENT OF MORTGAGE INSURANCE PREMIUMS DUE UNDER SERVICEMEN'S INSURED MORTGAGE BY THE DESIGNATED OFFICERS OF THE DEPARTMENT OF DEFENSE CONTINUES UNTIL THE FIRST DAY OF THE MONTH FOLLOWING THE RECEIPT BY THE FHA OF A CERTIFICATE OF TERMINATION. PURSUANT THERETO, FHA REQUESTED PAYMENT OF MORTGAGE INSURANCE PREMIUMS FOR THE MONTHS OF MARCH THROUGH JUNE 1956. THE QUESTION PRESENTED FOR OUR DECISION IN THE NEWSOME CASE IS WHETHER PAYMENT OF PREMIUMS BY YOUR DEPARTMENT FOR THE MONTHS OF APRIL THROUGH JUNE ARE PROPER. ALSO, WHETHER THE PAYMENT FOR MARCH SHOULD BE PAID IN FULL OR ONLY FOR THAT PORTION OF THE MONTH NEWSOME SERVED ON ACTIVE DUTY.

IN REGARD TO RALPH I. RICKETTS, IT APPEARS THAT A CERTIFICATE OF ELIGIBILITY FOR AN FHA INSURED MORTGAGE WAS ISSUED ON MAY 5, 1955, AND THE CERTIFICATE WAS ENDORSED FOR INSURANCE ON JUNE 24, 1955. THE MORTGAGE INSURANCE PREMIUMS WERE PAID ONE YEAR IN ADVANCE, COVERING THE PERIOD JUNE 1, 1955 THROUGH MAY 31, 1956, PURSUANT TO FHA REGULATIONS. PAYMENT IN THE AMOUNT OF $59.85 WAS MADE ON SEPTEMBER 19, 1955. FHA THEN REFUNDED $34.94 FOR THE PERIOD NOVEMBER 1, 1955, THROUGH MAY 31, 1956. IN THE EVENT THE FIRST QUESTION IN THE NEWSOME CASE IS ANSWERED IN THE NEGATIVE, THE DISBURSING OFFICER REQUESTS A DECISION WHETHER THE MORTGAGE INSURANCE PREMIUMS FOR THE MONTHS OF AUGUST THROUGH OCTOBER (WHEN THE MEMBER WAS NO LONGER IN THE SERVICE), AMOUNTING TO $14.97, SHOULD BE OFFSET AGAINST FUTURE PAYMENTS TO THE FHA. IN ADDITION, DECISION IS REQUESTED WHETHER THE OFFSET FOR JULY SHOULD BE MADE IN A PRORATA AMOUNT FOR THAT PORTION OF THE MONTH THAT RICKETTS WAS NOT ON ACTIVE DUTY.

SECTION 124 OF THE CITED ACT AMENDS TITLE II OF THE NATIONAL HOUSING ACT, 48 STAT. 1246, AS AMENDED, BY ADDING SECTION 222. THE PURPOSE OF THE SECTION IS TO AID IN THE PROVISION OF HOUSING ACCOMMODATIONS FOR SERVICEMEN, AND IT PROVIDES IN PERTINENT PART AS FOLLOWS:

"SEC. 222. (A) * * * AS USED IN THIS SECTION, A "SERVICEMAN" MEANS A PERSON TO WHOM THE SECRETARY OF THE DEFENSE (OR ANY OFFICER OR EMPLOYEE DESIGNATED BY HIM) * * * HAS ISSUED A CERTIFICATE HEREUNDER INDICATING THAT SUCH PERSON REQUIRES HOUSING, IS SERVING ON ACTIVE DUTY IN THE ARMED FORCES OF THE UNITED STATES * * * AND HAS SERVED ON ACTIVE DUTY FOR MORE THAN TWO YEARS * * *.

"/C) THE COMMISSIONER (FEDERAL HOUSING ADMINISTRATION) MAY PRESCRIBE THE MANNER IN WHICH A MORTGAGE MAY BE ACCEPTED FOR INSURANCE UNDER THIS SECTION. PREMIUMS FIXED BY THE COMMISSIONER UNDER SECTION 203 WITH RESPECT TO, OR PAYABLE DURING, THE PERIOD OF OWNERSHIP BY A SERVICEMAN OF THE PROPERTY INVOLVED SHALL NOT BE PAYABLE BY THE MORTGAGEE BUT SHALL BE PAID NOT LESS FREQUENTLY THAN ONCE EACH YEAR, UPON REQUEST OF THE COMMISSIONER TO THE SECRETARY OF DEFENSE * * * FROM THE RESPECTIVE APPROPRIATIONS AVAILABLE FOR PAY AND ALLOWANCES OF PERSONS ELIGIBLE FOR MORTGAGE INSURANCE UNDER THIS SECTION. AS USED HEREIN,"THE PERIOD OF OWNERSHIP BY A SERVICEMAN" MEANS THE PERIOD, FOR WHICH PREMIUMS ARE FIXED, PRIOR TO THE DATE THAT THE SECRETARY OF DEFENSE (OR ANY OFFICER OR EMPLOYEE DESIGNATED BY HIM) * * * FURNISHES THE COMMISSIONER WITH A CERTIFICATION THAT SUCH OWNERSHIP (AS DEFINED BY THE COMMISSIONER) HAS TERMINATED.

"PERIOD OF OWNERSHIP BY SERVICEMAN," IS DEFINED BY THE COMMISSIONER, (24 CFR, 225.2 (D) ( AS ,THAT PERIOD OF TIME DURING WHICH A MILITARY SERVICE IS REQUIRED TO PAY MORTGAGE INSURANCE PREMIUMS TO THE FEDERAL HOUSING COMMISSIONER, COMMENCING WITH THE DATE THE FEDERAL HOUSING COMMISSIONER ENDORSES A MORTGAGE LOAN FOR INSURANCE AND TERMINATING WHEN THE SECRETARY FURNISHES THE COMMISSIONER WITH A CERTIFICATE INDICATING THAT THE MILITARY SERVICE WILL NO LONGER BE LIABLE FOR PAYMENT OF INSURANCE PREMIUMS TO THE COMMISSIONER.'

EACH MORTGAGOR HERE INVOLVED WAS A "SERVICEMAN," AS DEFINED IN THE ACT, AT THE TIME THE MORTGAGES WERE ENDORSED FOR INSURANCE BY FHA--- CERTIFICATES OF ELIGIBILITY HAVING BEEN DULY ISSUED IN EACH CASE. THIS STATUS, UNDER THE STATUTE AND IMPLEMENTING REGULATION, DID NOT CHANGE UNTIL A CERTIFICATE OF TERMINATION WAS FURNISHED FHA. IN VIEW THEREOF, THE FHA REQUEST FOR PAYMENT OF PREMIUMS IN THE CASE OF THOMAS I. NEWSOME FOR THE MONTHS OF MARCH THROUGH JUNE, 1956 (JUNE BEING THE MONTH A CERTIFICATE OF TERMINATION WAS FURNISHED FHA), APPEARS PROPER. ALSO, SINCE UNDER THE STATUTE AND REGULATION THE DATE A CERTIFICATE OF TERMINATION IS FURNISHED CONSTITUTES THE DETERMINING FACTOR, THE PREMIUM FOR THE MONTH OF MARCH WOULD BE UNAFFECTED BY NEWSOME'S RELEASE FROM ACTIVE DUTY. THE QUESTIONS SUBMITTED REGARDING THE THOMAS I. NEWSOME CASE ARE ANSWERED ACCORDINGLY.

CONCERNING THE RALPH I. RICKETTS CASE, CONSIDERATION OF THE FIRST QUESTION IS NOT REQUIRED IN VIEW OF THE AFFIRMATIVE ANSWER TO THE QUESTION IN THE NEWSOME CASE. REGARDING THE QUESTION WHETHER A PRORATA OFFSET SHOULD BE MADE FOR THE PORTION OF THE MONTH RICKETTS WAS NOT ON ACTIVE DUTY, YOU ARE ADVISED FOR THE REASONS ABOVE STATED THAT SUCH OFFSET IS NOT REQUIRED.

THE FOREGOING CONCERNS PAYMENT OF PREMIUMS BY YOUR DEPARTMENT TO FHA, AND IS NOT TO BE VIEWED AS AFFECTING THE LIABILITY OF THE FORMER SERVICEMEN TO THE DEPARTMENT OF THE NAVY FOR MORTGAGE INSURANCE PREMIUMS PAID ON THEIR BEHALF IN CIRCUMSTANCES SUCH AS HERE INVOLVED. UNDER THE REGULATIONS AND PROCEDURES SET FORTH IN SECNAV INSTRUCTIONS 1741.4, OF NOVEMBER 10, 1954, A MEMBER'S ELIGIBILITY FOR PAYMENT OF MORTGAGE INSURANCE PREMIUMS BY THE DEPARTMENT OF THE NAVY IS TERMINATED UPON DISCHARGE OR RELEASE FROM ACTIVE DUTY. HENCE, COLLECTION ACTION SHOULD BE TAKEN BY YOUR DEPARTMENT AGAINST THE FORMER SERVICEMEN FOR PREMIUMS PAID ON THEIR BEHALF FOR THE PERIOD SUBSEQUENT TO DATE OF RELEASE FROM ACTIVE DUTY OR DISCHARGE, AS THE CASE MAY BE. ..END :