B-166614, APR. 25, 1969

B-166614: Apr 25, 1969

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THE LENDING INSTITUTION IMPOSED A SERVICE CHARGE OF $450 AT THE TIME THE LOAN WAS ORIGINATED. YOU SAY THAT SUCH ACTION WAS BASED UPON INFORMATION THAT THE FEDERAL HOUSING ADMINISTRATION ALLOWS ONLY A ONE PERCENT SERVICE CHARGE ON LOANS INSURED BY THAT ADMINISTRATION. YOU QUESTION WHETHER IT WAS PROPER TO LIMIT REIMBURSEMENT FOR THE SERVICE CHARGE TO ONE PERCENT OF THE LOAN AMOUNT. PROVIDES THAT REIMBURSEMENT FOR COSTS INCURRED IN THE PURCHASE OR SALE OF A RESIDENCE "MAY NOT EXCEED THOSE CUSTOMARILY CHARGED IN THE LOCALITY WHERE THE RESIDENCE IS LOCATED.'. WE STATED THAT WE WOULD NOT OBJECT TO THE REIMBURSEMENT OF A SERVICE CHARGE AT A HIGHER RATE FOR CONVENTIONAL LOANS THAN IS APPLICABLE IN THE CASE OF FEDERAL HOUSING ADMINISTRATION FINANCING IF IT IS SHOWN THAT SUCH HIGHER RATE IS CUSTOMARILY CHARGED IN THE CASE OF CONVENTIONAL LOANS IN THE AREA INVOLVED.

B-166614, APR. 25, 1969

TO MR. ROBERT L. LEITH:

THIS REFERS TO YOUR LETTER OF APRIL 3, 1969, WITH ENCLOSURES, REQUESTING OUR DECISION AS TO THE MAXIMUM REIMBURSEMENT ALLOWABLE FOR LOAN ORIGINATION FEES ON CONVENTIONAL MORTGAGE LOANS.

YOUR QUESTION ARISES IN CONNECTION WITH THE CLAIM OF MR. ELBERT M. HOWARD, AN EMPLOYEE OF THE ATOMIC ENERGY COMMISSION, FOR REIMBURSEMENT OF CERTAIN REAL ESTATE EXPENSES INCURRED BY HIM IN CONNECTION WITH THE PURCHASE OF A RESIDENCE IN THE VICINITY OF ATLANTA, GEORGIA, HIS NEW OFFICIAL STATION.

THE ENCLOSURES TO YOUR LETTER SHOW THAT THE EMPLOYEE OBTAINED A CONVENTIONAL LOAN IN THE AMOUNT OF $28,900 FROM THE DECATUR FEDERAL SAVINGS AND LOAN ASSOCIATION. THE LENDING INSTITUTION IMPOSED A SERVICE CHARGE OF $450 AT THE TIME THE LOAN WAS ORIGINATED. THE EMPLOYEE CLAIMED REIMBURSEMENT FOR THE FULL AMOUNT OF THE SERVICE CHARGE, BUT YOUR OFFICE LIMITED REIMBURSEMENT TO ONE PERCENT OF THE LOAN AMOUNT OR $289. YOU SAY THAT SUCH ACTION WAS BASED UPON INFORMATION THAT THE FEDERAL HOUSING ADMINISTRATION ALLOWS ONLY A ONE PERCENT SERVICE CHARGE ON LOANS INSURED BY THAT ADMINISTRATION. HOWEVER, SINCE THE EMPLOYEE HERE INVOLVED SECURED CONVENTIONAL FINANCING RATHER THAN FEDERAL HOUSING ADMINISTRATION FINANCING, YOU QUESTION WHETHER IT WAS PROPER TO LIMIT REIMBURSEMENT FOR THE SERVICE CHARGE TO ONE PERCENT OF THE LOAN AMOUNT.

SUBSECTION 5724A (A) (4) OF TITLE 5, U.S.C. PROVIDES THAT REIMBURSEMENT FOR COSTS INCURRED IN THE PURCHASE OR SALE OF A RESIDENCE "MAY NOT EXCEED THOSE CUSTOMARILY CHARGED IN THE LOCALITY WHERE THE RESIDENCE IS LOCATED.' ALSO, SEE SECTION 4.3B OF BUREAU OF THE BUDGET CIRCULAR NO. A- 56, AS AMENDED BY TRANSMITTAL MEMORANDUM NO. 4, DATED AUGUST 7, 1968.

IN OUR DECISION OF APRIL 1, 1969, B-166322 (COPY HEREWITH), WE STATED THAT WE WOULD NOT OBJECT TO THE REIMBURSEMENT OF A SERVICE CHARGE AT A HIGHER RATE FOR CONVENTIONAL LOANS THAN IS APPLICABLE IN THE CASE OF FEDERAL HOUSING ADMINISTRATION FINANCING IF IT IS SHOWN THAT SUCH HIGHER RATE IS CUSTOMARILY CHARGED IN THE CASE OF CONVENTIONAL LOANS IN THE AREA INVOLVED.

THE FILE WHICH YOU FORWARDED TO OUR OFFICE CONTAINS A LETTER FROM THE FEDERAL HOUSING ADMINISTRATION'S REGIONAL OFFICE IN ATLANTA STATING THAT THE CLOSING COSTS CHARGED BY THE SAVINGS AND LOAN ASSOCIATION IN THE PRESENT CASE "ARE IN LINE WITH LOCAL PRACTICE AND REASONABLE IN AMOUNT.' IN VIEW OF SUCH INFORMATION THE EMPLOYEE MAY BE REIMBURSED THE ADDITIONAL AMOUNT OF THE SERVICE CHARGE ($161) IF OTHERWISE PROPER.