B-168870, FEB. 13, 1970

B-168870: Feb 13, 1970

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A-56 IS NOT REIMBURSABLE. AN ESCROW FEE FOR THE HANDLING AND SETTLEMENT OF A REAL ESTATE TRANSACTION IS SIMILAR TO A CLOSING FEE AND IS A REIMBURSABLE ITEM. THE $168 IS MADE UP OF $111 ASSUMPTION FEE. OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT. OR CREDIT REPORT. "(8) ANY CHARGE IMPOSED BY A CREDITOR UPON ANOTHER CREDITOR FOR PURCHASING OR ACCEPTING AN OBLIGATION OF A CUSTOMER IF THE CUSTOMER IS REQUIRED TO PAY ANY PART OF THAT CHARGE IN CASH. IT APPEARS THAT A LOAN ASSUMPTION FEE IS SIMILAR TO A LOAN ORIGINATION FEE AND IS TO BE REGARDED AS A FINANCE CHARGE IN LINE WITH SECTION 226.4 (A) (8) OF REGULATION Z. IT FOLLOWS THAT REIMBURSEMENT FOR SUCH A CHARGE IS PRECLUDED BY SECTION 4.2D OF CIRCULAR NO.

B-168870, FEB. 13, 1970

CIVIL PAY--TRANSFERS--REAL ESTATE EXPENSES--LOAN ASSUMPTION FEE DECISION TO CERTIFYING OFFICER OF FOREST SERVICE CONCERNING REAL ESTATE EXPENSES FOR PURCHASE OF RESIDENCE BY EMPLOYEE TRANSFERRED FROM SAN FRANCISCO, TO BAKERSFIELD, CALIFORNIA. A $111 ASSUMPTION FEE PAID BY EMPLOYEE FOR PURCHASE OF HOME MUST BE CONSIDERED SIMILAR TO A LOAN ORIGINATION FEE AND AS SUCH REGARDED AS A FINANCE CHARGE AND THEREFORE UNDER SECTION 4.2D OF BUREAU OF BUDGET CIRCULAR NO. A-56 IS NOT REIMBURSABLE. AN ESCROW FEE FOR THE HANDLING AND SETTLEMENT OF A REAL ESTATE TRANSACTION IS SIMILAR TO A CLOSING FEE AND IS A REIMBURSABLE ITEM.

TO MR. PAUL J. GRAINGER:

THIS REFERS TO YOUR LETTER OF JANUARY 16, 1970, WITH ENCLOSURES, REFERENCE 6540, REQUESTING A DECISION FROM OUR OFFICE AS TO THE PROPRIETY OF CERTIFYING FOR PAYMENT A VOUCHER IN FAVOR OF MR. JOHN F. MARKER FOR REIMBURSEMENT OF $168 REPRESENTING REAL ESTATE EXPENSES INCURRED IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT HIS NEW DUTY STATION INCIDENT TO HIS TRANSFER FROM SAN FRANCISCO, CALIFORNIA, TO BAKERSFIELD, CALIFORNIA.

THE $168 IS MADE UP OF $111 ASSUMPTION FEE, $55 ESCROW FEE AND $2 FOR RECORDING THE DEED. SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. A- 56, REVISED JUNE 26, 1969, PROVIDES IN PART AS FOLLOWS:

"* * * 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. * * *"

SUPPLEMENTING SECTION 106 OF THE ACT (15 U.S.C. 1605), SECTION 226.4 OF THE SAID REGULATION Z (12 CFR, PART 226), PUBLISHED FEBRUARY 11, 1969, 34 F.R. 2002 ET SEQ; EFFECTIVE JULY 1, 1969, PROVIDES IN PART AS FOLLOWS:

"SEC. 226.4 DETERMINATION OF FINANCE CHARGE.

"(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:

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

"(2) SERVICE, TRANSACTION, ACTIVITY, OR CARRYING CHARGE.

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

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

"(8) ANY CHARGE IMPOSED BY A CREDITOR UPON ANOTHER CREDITOR FOR PURCHASING OR ACCEPTING AN OBLIGATION OF A CUSTOMER IF THE CUSTOMER IS REQUIRED TO PAY ANY PART OF THAT CHARGE IN CASH, AS AN ADDITION TO THE OBLIGATION, OR AS A DEDUCTION FROM THE PROCEEDS OF THE OBLIGATION."

IT APPEARS THAT A LOAN ASSUMPTION FEE IS SIMILAR TO A LOAN ORIGINATION FEE AND IS TO BE REGARDED AS A FINANCE CHARGE IN LINE WITH SECTION 226.4 (A) (8) OF REGULATION Z, QUOTED ABOVE. IT FOLLOWS THAT REIMBURSEMENT FOR SUCH A CHARGE IS PRECLUDED BY SECTION 4.2D OF CIRCULAR NO. A-56.

AS TO THE ESCROW FEE, WE ASSUME THAT IT IS NOT A FINANCE CHARGE BUT RELATES TO THE HANDLING AND SETTLEMENT OF THE TRANSACTION SIMILAR TO A CLOSING FEE. IF SUCH ASSUMPTION BE CORRECT, THIS WOULD BE REIMBURSABLE. OF COURSE THERE IS NO DOUBT THAT THE $2 FEE FOR THE COST OF RECORDING THE DEED IS REIMBURSABLE.

ACTION ON THE VOUCHER WHICH IS RETURNED HEREWITH SHOULD BE TAKEN IN ACCORDANCE WITH THE FOREGOING.