B-169475, MAY 14, 1970

B-169475: May 14, 1970

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ITEM MAY NOT BE CERTIFIED FOR PAYMENT SINCE IT IS FINANCE CHARGE UNDER TRUTH IN LENDING ACT. SUCH FINANCE CHARGES ARE NONREIMBURSABLE UNDER SEC. 4.2D OF A-56. WILBANKS: THIS IS IN REPLY TO YOUR LETTER OF MARCH 26. THE RECORD INDICATES THAT THE CHARGE IN QUESTION IS A FEE WHICH FEDERAL HOUSING ADMINISTRATION REGULATIONS PERMIT THE MORTGAGEE TO COLLECT FROM THE MORTGAGOR TO COMPENSATE HIM FOR EXPENSES INCURRED IN ORIGINATING AND CLOSING THE LOAN. 24 CFR 203.27. THE CHARGE WAS DISALLOWED BY THE AUTHORIZED CERTIFYING OFFICER ON THE GROUND THAT IT IS A LOAN ORIGINATION FEE WHICH IS NOT REIMBURSABLE UNDER SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. TURNER RECLAIMS THE ITEM AND STATES THAT THE CHARGE IS ONE FOR SERVICES RENDERED AND IS NOT A FINANCE CHARGE.

B-169475, MAY 14, 1970

OFFICERS AND EMPLOYEES--TRANSFERS--RELOCATION EXPENSES--HOUSE PURCHASE- LOAN CHARGES REGARDING $240 "CONVEYANCING CHARGE" PAID BY EMPLOYEE TO MORTGAGEE, NOV. 18, 1969, INCIDENT TO HOUSE PURCHASE UPON STATION TRANSFER AND ADMINISTRATIVELY DISALLOWED AS LOAN ORIGINATION FEE NONREIMBURSABLE UNDER SEC. 4.2D, BUR. OF BUDGET CIR. NO. A-56, AMENDED JUNE 26, 1969, ITEM MAY NOT BE CERTIFIED FOR PAYMENT SINCE IT IS FINANCE CHARGE UNDER TRUTH IN LENDING ACT, TITLE I, PUB. L. 90-321, EFFECTIVE JULY 1, 1969, NOT CHARGE FOR SERVICES RENDERED, AND SUCH FINANCE CHARGES ARE NONREIMBURSABLE UNDER SEC. 4.2D OF A-56, REGULATIONS ISSUED PURSUANT TO STATUTE.

TO MRS. JEANNETTE B. WILBANKS:

THIS IS IN REPLY TO YOUR LETTER OF MARCH 26, 1970, REQUESTING OUR DECISION AS TO THE ALLOWABILITY OF A VOUCHER FOR $240 IN FAVOR OF MR. MONFORD P. TURNER, AN EMPLOYEE OF YOUR AGENCY, COVERING A "CONVEYANCING CHARGE" PAID BY HIM ON NOVEMBER 18, 1969, INCIDENT TO THE PURCHASE OF A HOUSE IN CONNECTION WITH HIS TRANSFER OF STATION.

THE RECORD INDICATES THAT THE CHARGE IN QUESTION IS A FEE WHICH FEDERAL HOUSING ADMINISTRATION REGULATIONS PERMIT THE MORTGAGEE TO COLLECT FROM THE MORTGAGOR TO COMPENSATE HIM FOR EXPENSES INCURRED IN ORIGINATING AND CLOSING THE LOAN. 24 CFR 203.27. THE CHARGE WAS DISALLOWED BY THE AUTHORIZED CERTIFYING OFFICER ON THE GROUND THAT IT IS A LOAN ORIGINATION FEE WHICH IS NOT REIMBURSABLE UNDER SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. A-56, AS AMENDED JUNE 26, 1969. MR. TURNER RECLAIMS THE ITEM AND STATES THAT THE CHARGE IS ONE FOR SERVICES RENDERED AND IS NOT A FINANCE CHARGE.

TRANSMITTAL MEMORANDUM NO. 5, JUNE 26, 1969, AMENDING CIRCULAR NO. A 56, PROVIDES IN PERTINENT PART AS FOLLOWS:

"THE REVISION OF 4.2D PROVIDES FOR REIMBURSEMENT OF MORTGAGE PREPAYMENT CHARGES, CLARIFIES THE TYPES OF EXPENSES THAT ARE REIMBURSABLE IN CONNECTION WITH THE CONSTRUCTION OF A RESIDENCE, REMOVES LENDER'S LOAN ORIGINATION FEE FROM THE LISTING OF REIMBURSABLE EXPENSES, AND PROHIBITS REIMBURSEMENT FOR EXPENSES WHICH ARE DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT. (THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, IS EFFECTIVE JULY 1, 1969.)"

THE FEDERAL HOUSING ADMINISTRATION HAS ADVISED US THAT WHILE THE ITEM IN QUESTION IS NOT GENERALLY REFERRED TO WITHIN THE AGENCY AS A FINANCING OR INTEREST CHARGE, THE TRUTH IN LENDING ACT REQUIRES DISCLOSURE OF THE ITEM AS A FINANCE CHARGE AND MANY LENDERS CONSIDER THE PAYMENT TO BE A DISCOUNT TO ENHANCE YIELD. ACCORDINGLY, THE ITEM MUST BE CONSIDERED A FINANCE CHARGE WHICH IS NOT REIMBURSABLE UNDER SECTION 4.2D OF CIRCULAR NO. A-56. SINCE THE CIRCULAR EMBODIES REGULATIONS ISSUED PURSUANT TO STATUTE, NEITHER OUR OFFICE NOR ANY EXECUTIVE AGENCY MAY WAIVE OR MODIFY ITS PROVISIONS.

IN VIEW OF THE ABOVE, THE VOUCHER RETURNED HEREWITH MAY NOT BE CERTIFIED FOR PAYMENT.