Skip to main content

B-168674, MAR 11, 1974

B-168674 Mar 11, 1974
Jump To:
Skip to Highlights

Highlights

A-56 PROVIDES THAT NO CHARGE OR EXPENSE IS REIMBURSABLE IF DETERMINED TO BE PART OF FINANCE CHARGE UNDER TRUTH IN LENDING ACT. TO DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT: A DECISION WAS REQUESTED AS TO WHETHER RECLAIM VOUCHERS FOR LOAN ORIGINATION FEES PAID BY MESSRS. THE EXPENSES WERE INCURRED BY THE EMPLOYEES IN CONNECTION WITH THEIR CHANGE OF STATION. THE RECORD SHOWS THAT THE INSURING OFFICE DIRECTOR WAS UNABLE TO MAKE A DETERMINATION AS TO THE ELIGIBILITY OF THESE ITEMS OF EXPENSE. OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT. REGULATION Z ISSUED PURSUANT THERETO BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. ***" UNDER SUCH PROVISION WHENEVER AN ITEM OF EXPENSE INCIDENT TO A REAL ESTATE TRANSACTION CONSTITUTES A FINANCE CHARGE WITHIN THE CONTEMPLATION OF REGULATION Z REIMBURSEMENT THEREFOR IS PRECLUDED.

View Decision

B-168674, MAR 11, 1974

TRANSFERRED EMPLOYEES MAY NOT BE REIMBURSED 1 PERCENT LOAN ORIGINATION FEE INCURRED INCIDENT TO PURCHASE OF HOUSE SINCE SECTION 4.2D OF OMB CIRCULAR NO. A-56 PROVIDES THAT NO CHARGE OR EXPENSE IS REIMBURSABLE IF DETERMINED TO BE PART OF FINANCE CHARGE UNDER TRUTH IN LENDING ACT, AND BANK DESCRIBES ITEMS AS PREPAID FINANCE CHARGES WITHIN MEANING OF SECTION 106(A)(3) OF THE ACT.

TO DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT:

A DECISION WAS REQUESTED AS TO WHETHER RECLAIM VOUCHERS FOR LOAN ORIGINATION FEES PAID BY MESSRS. FLOYD W. PODHASKI AND MICHAEL A. SCHUBERT, EMPLOYEES OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, MAY BE CERTIFIED FOR PAYMENT. THE EXPENSES WERE INCURRED BY THE EMPLOYEES IN CONNECTION WITH THEIR CHANGE OF STATION.

THE RECORD SHOWS THAT THE INSURING OFFICE DIRECTOR WAS UNABLE TO MAKE A DETERMINATION AS TO THE ELIGIBILITY OF THESE ITEMS OF EXPENSE.

SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, REVISED, AUGUST 17, 1971, PROVIDES IN PERTINENT PART:

"*** 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. ***"

UNDER SUCH PROVISION WHENEVER AN ITEM OF EXPENSE INCIDENT TO A REAL ESTATE TRANSACTION CONSTITUTES A FINANCE CHARGE WITHIN THE CONTEMPLATION OF REGULATION Z REIMBURSEMENT THEREFOR IS PRECLUDED. SECTION 106 OF THE TRUTH IN LENDING ACT IS IN PART AS FOLLOWS:

"(A) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE AMOUNT OF THE FINANCE CHARGE IN CONNECTION WITH ANY CONSUMER CREDIT TRANSACTION SHALL BE DETERMINED AS THE SUM OF ALL CHARGES, PAYABLE DIRECTLY OR INDIRECTLY BY THE PERSON TO WHOM THE CREDIT IS EXTENDED, AND IMPOSED DIRECTLY OR INDIRECTLY BY THE CREDITOR AS AN INCIDENT TO THE EXTENSION OF CREDIT INCLUDING ANY OF THE FOLLOWING TYPES OF CHARGES WHICH ARE APPLICABLE:

"(1) INTEREST, TIME PRICE DIFFERENTIAL, AND ANY AMOUNT PAYABLE UNDER A POINT, DISCOUNT, OR OTHER SYSTEM OF ADDITIONAL CHARGES.

"(2) SERVICE OR CARRYING CHARGE.

"(3) LOAN FEE, FINDER'S FEE, OR SIMILAR CHARGE.

"(4) FEE FOR AN INVESTIGATION OR CREDIT REPORT.

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

"(E) THE FOLLOWING ITEMS, WHEN CHARGED IN CONNECTION WITH ANY EXTENSION OF CREDIT SECURED BY AN INTEREST IN REAL PROPERTY, SHALL NOT BE INCLUDED IN THE COMPUTATION OF THE FINANCE CHARGE WITH RESPECT TO THAT TRANSACTION:

"(1) FEES OR PREMIUMS FOR TITLE EXAMINATION, TITLE INSURANCE, OR SIMILAR PURPOSES.

"(2) FEES FOR PREPARATION OF A DEED, SETTLEMENT STATEMENT, OR OTHER DOCUMENTS.

"(3) ESCROWS FOR FUTURE PAYMENTS OF TAXES AND INSURANCE.

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

"(5) APPRAISAL FEES.

"(6) CREDIT REPORTS."

REGULATION Z (12 CFR, PART 226), IS TO THE SAME EFFECT.

THE LOAN ORIGINATION FEES RECLAIMED BY MESSRS. PODHASKI AND SCHUBERT ARE DESCRIBED BY THE BANK AS PREPAID FINANCE CHARGES WITHIN THE MEANING OF SECTION 106(A)(3) OF THE TRUTH IN LENDING ACT. IT SHOULD BE NOTED THAT SUCH A FEE DOES NOT COME WITHIN THE ITEMS EXCLUDED UNDER SECTION 106(E) OF THE ACT. ACCORDINGLY, REIMBURSEMENT OF THE ITEMS IS PRECLUDED. SEE B- 178782, JUNE 21, 1973.

THE PROVISION PRECLUDING THE REIMBURSEMENT OF LOAN ORIGINATION CHARGES IS CONTAINED IN THE CIRCULAR ISSUED BY THE OFFICE OF MANAGEMENT AND BUDGET. THE CIRCULAR IS A STATUTORY REGULATION WHICH HAS THE FORCE AND EFFECT OF LAW AND, THEREFORE, SUCH PROVISION MAY NOT BE WAIVED BY OUR OFFICE OR AN EXECUTIVE DEPARTMENT. SEE 49 COMP. GEN. 145, 147 (1969).

ACCORDINGLY, THE VOUCHERS MAY NOT BE CERTIFIED FOR PAYMENT.

GAO Contacts

Office of Public Affairs