B-170007, JUL. 13, 1970

B-170007: Jul 13, 1970

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PAID TO A TITLE COMPANY AN ESCROW AND A TERMITE INSPECTION FEE WHICH WERE LISTED AS PREPAID FINANCE CHARGES MAY HAVE SUCH ESCROW FEE REGARDED AS THE USUAL CHARGE FOR SERVICES FOR ESCROW AGENT RATHER THAN AS A FINANCE CHARGE FOR EXTENSION OF CREDIT AND THEREFORE BOTH THE ESCROW FEE AND THE TERMITE FEE MAY BE ALLOWED AS AN EXPENSE CUSTOMARILY INCURRED IN THE SALE OF A RESIDENCE AT THAT LOCATION. YOU QUESTION REIMBURSEMENT OF AN ESCROW FEE OF $81.25 AND A TERMITE INSPECTION FEE OF $35 SINCE THEY ARE LISTED AS PREPAID FINANCE CHARGES. OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT. SUCH ESCROW FEE IS PAYABLE WHETHER THE TRANSACTION INVOLVED IS FOR CASH OR CREDIT.

B-170007, JUL. 13, 1970

CIVIL PAY -- REIMBURSEMENT -- TRANSFER -- HOUSE ESCROW FEE -- TERMITE INSPECTION FEE DECISION TO CERTIFYING OFFICER, DEPT. OF AGRICULTURE APPROVING CERTIFICATION OF VOUCHER FOR PAYMENT OF ESCROW FEE AND TERMITE INSPECTION FEE INCURRED IN THE PURCHASE OF A RESIDENCE INCIDENT TO EMPLOYEE'S TRANSFER TO NEW STATION SAN FRANCISCO, CALIFORNIA. EMPLOYEE OF THE FOREST SERVICE WHO, INCIDENT TO PURCHASE OF HOUSE AT NEW STATION IN SAN FRANCISCO, CALIF., PAID TO A TITLE COMPANY AN ESCROW AND A TERMITE INSPECTION FEE WHICH WERE LISTED AS PREPAID FINANCE CHARGES MAY HAVE SUCH ESCROW FEE REGARDED AS THE USUAL CHARGE FOR SERVICES FOR ESCROW AGENT RATHER THAN AS A FINANCE CHARGE FOR EXTENSION OF CREDIT AND THEREFORE BOTH THE ESCROW FEE AND THE TERMITE FEE MAY BE ALLOWED AS AN EXPENSE CUSTOMARILY INCURRED IN THE SALE OF A RESIDENCE AT THAT LOCATION.

TO MR. PAUL J. GRAINGER:

WE REFER TO YOUR LETTER DATED MAY 28, 1970, REQUESTING OUR DECISION AS TO WHETHER YOU MAY CERTIFY FOR PAYMENT A VOUCHER IN THE AMOUNT OF $176.55 SUBMITTED BY MR. JOHN E. NEIRINCKX TO REIMBURSE HIM FOR CERTAIN EXPENSES INCURRED IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT HIS NEW DUTY STATION INCIDENT TO HIS TRANSFER FROM ORANGEVILLE, IDAHO, TO SAN FRANCISCO, CALIFORNIA.

YOU QUESTION REIMBURSEMENT OF AN ESCROW FEE OF $81.25 AND A TERMITE INSPECTION FEE OF $35 SINCE THEY ARE LISTED AS PREPAID FINANCE CHARGES. SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. A-56, REVISED JUNE 26, 1969, PROVIDES THAT 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, 15 U.S.C. 1605.

WHILE THE BANK OF CALIFORNIA, N.A., LISTS AN ESCROW FEE OF $131 AS A PREPAID FINANCE CHARGE, THE CLOSING STATEMENT OF THE FINANCIAL TITLE COMPANY, WALNUT CREEK, CALIFORNIA, ALSO SHOWS AN ESCROW FEE OF $81.25 AS A CHARGE. BY LETTER DATED APRIL 2, 1970, THE TITLE COMPANY FURNISHED A COPY OF ITS RATE SCHEDULE SHOWING THE BREAKDOWN OF CHARGES FOR TITLE INSURANCE PREMIUMS AND ESCROW FEES. THAT SCHEDULE SHOWS AN ESCROW FEE OF $81.25 FOR A $29,000 TRANSACTION AS BEING APPLICABLE TO THE PURCHASE OF THE HOUSE IN QUESTION AT A PRICE OF $28,500.

UNDER THE ESCROW SYSTEM FOR SALE OF REAL ESTATE IN CALIFORNIA THE ESCROW FEE GENERALLY COVERS THE COSTS INCURRED BY THE ESCROW AGENT FOR THE PREPARATION AND RECORDING OF DOCUMENTS AND FOR HANDLING THE ESCROW FUNDS. SUCH ESCROW FEE IS PAYABLE WHETHER THE TRANSACTION INVOLVED IS FOR CASH OR CREDIT. THE ESCROW FEE CHARGED IN THIS CASE BY THE TITLE COMPANY SEEMS TO BE ITS USUAL CHARGE FOR THE SERVICES OF AN ESCROW AGENT AND THERE IS NOTHING OF RECORD TO INDICATE THAT ANY PART OF THE FEE WAS INCIDENT TO THE EXTENSION OF CREDIT. COMPARE B-162738, JANUARY 10, 1968, COPY HEREWITH.

CONCERNING THE TERMITE INSPECTION FEE, OUR VIEW IS -- DESPITE THE BANK'S SHOWING IT AS A PREPAID FINANCE CHARGE -- THAT IT MAY BE ALLOWED AS AN EXPENSE CUSTOMARILY INCURRED IN CONNECTION WITH THE SALE OF A RESIDENCE IN THE AREA WHERE THE HOUSE INVOLVED IS LOCATED. SEE B 163801, MAY 1, 1968, COPY HEREWITH.

ACCORDINGLY, THE VOUCHER WHICH IS RETURNED MAY BE CERTIFIED FOR PAYMENT.