B-170967, NOV. 17, 1970

B-170967: Nov 17, 1970

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A LOAN ASSUMPTION FEE PAID AT A FLAT RATE FOR EXPENSES INCURRED IN TRANSFERRING A MORTGAGE FROM SELLER TO BUYER - A TRANSFERRED EMPLOYEE - IS A FINANCE CHARGE AND THEREFORE UNDER SEC. 4.2D OF BOB CIRCULAR NO. A 56 SUCH FEE IS NOT REIMBURSABLE. WAS SUBMITTED WITH YOUR LETTER AND YOU ASK WHETHER IT MAY BE CERTIFIED FOR PAYMENT. YOU POINT OUT THAT THE CLAIM WAS ADMINISTRATIVELY DISALLOWED UNDER THE HOLDINGS IN B-168359. WHEREIN WE STATED THAT A LOAN ASSUMPTION FEE OR A TRANSFER FEE IS TO BE REGARDED AS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT. STATES AS FOLLOWS CONCERNING SUCH FEE: "THE $50 TRANSFER FEE WHICH YOU PAID WAS TO COVER ADMINISTRATIVE COSTS OF CHANGING NAMES ON VARIOUS RECORDS AND FILES.

B-170967, NOV. 17, 1970

TRANSFERRED EMPLOYEES - REAL ESTATE EXPENSES - MORTGAGE TRANSFER FEE DECISION HOLDING THAT VOUCHER REPRESENTING REIMBURSEMENT FOR A MORTGAGE TRANSFER FEE PAID BY EMPLOYEE FOR PURCHASE OF HOME AT NEW STATION MAY NOT BE CERTIFIED FOR PAYMENT. A LOAN ASSUMPTION FEE PAID AT A FLAT RATE FOR EXPENSES INCURRED IN TRANSFERRING A MORTGAGE FROM SELLER TO BUYER - A TRANSFERRED EMPLOYEE - IS A FINANCE CHARGE AND THEREFORE UNDER SEC. 4.2D OF BOB CIRCULAR NO. A 56 SUCH FEE IS NOT REIMBURSABLE.

TO MISS MILDRED J. KELL:

YOUR LETTER OF SEPTEMBER 29, 1970, REFERENCE ADFF:SB, ACKNOWLEDGED OCTOBER 27, SUBMITS A CLAIM FOR $50 FROM MR. EMMETT CAMERON, AN EMPLOYEE OF YOUR SERVICE, REQUESTING REIMBURSEMENT FOR A MORTGAGE TRANSFER FEE PAID BY HIM IN CONNECTION WITH THE PURCHASE OF A RESIDENCE ON JUNE 4, 1970, UPON PERMANENT CHANGE OF STATION. A VOUCHER SIGNED BY MR. CAMERON IN THE FOREGOING AMOUNT, WITH RELATED PAPERS, WAS SUBMITTED WITH YOUR LETTER AND YOU ASK WHETHER IT MAY BE CERTIFIED FOR PAYMENT.

YOU POINT OUT THAT THE CLAIM WAS ADMINISTRATIVELY DISALLOWED UNDER THE HOLDINGS IN B-168359, JANUARY 2, 1970, AND B-169158, APRIL 15, 1970, WHEREIN WE STATED THAT A LOAN ASSUMPTION FEE OR A TRANSFER FEE IS TO BE REGARDED AS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE 1 AND REGULATION Z. FURTHER YOU POINT OUT THAT THE FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF JACKSON, MISSISSIPPI, WHICH CHARGED THE FEE, STATES AS FOLLOWS CONCERNING SUCH FEE:

"THE $50 TRANSFER FEE WHICH YOU PAID WAS TO COVER ADMINISTRATIVE COSTS OF CHANGING NAMES ON VARIOUS RECORDS AND FILES. SINCE NO RELEASE OF LIABILITY WAS INVOLVED, REGULATION Z DOES NOT COVER THE TRANSACTION." NOTE YOUR STATEMENT THAT IN THE SOUTHEAST REGION YOU HAVE FOUND THAT IN MOST LOAN ASSUMPTION TRANSACTIONS A MORTGAGE OR LOAN TRANSFER FEE RANGING FROM $25 TO $50 IS CHARGED TO COMPENSATE FOR EXPENSES INCURRED IN TRANSFERRING THE LOAN FROM THE SELLER TO THE BUYER. FURTHER WE NOTE THAT YOU POINT OUT THAT IN OUR DECISIONS CITED ABOVE THE LOAN TRANSFER FEES ARE ONE PERCENT OF THE UNPAID BALANCE OF THE MORTGAGE.

THE PAPERS SUBMITTED SHOW THAT MR. AND MRS. CAMERON ASSUMED THE MORTGAGE OF THE SELLER WITH THE ABOVE LENDING INSTITUTION AND WERE ASSESSED THE $50 FEE THEREFOR. IN OUR DECISION B-164906, AUGUST 12, 1968, COPY ENCLOSED, WE POINTED OUT THAT IT WAS OUR UNDERSTANDING THAT THE "ASSUMPTION FEE" THEREIN, A PERCENTAGE OF THE UNPAID OUTSTANDING LOAN, WAS SIMILAR TO THE LOAN APPLICATION OR LOAN ORIGINATION FEE AUTHORIZED REIMBURSABLE UNDER THE EXISTING LANGUAGE OF SECTION 4.2D, BUREAU OF THE BUDGET CIRCULAR NO. A-56, REVISED OCTOBER 12, 1966. WE HAD CONSISTENTLY HELD THEREUNDER THAT SUCH FEES WERE REIMBURSABLE UNTIL THE JUNE 26, 1969 REVISION OF CIRCULAR NO. A- 56. WE POINTED OUT IN OUR DECISIONS B-168359, JANUARY 2, 1970; B-168870, FEBRUARY 13, 1970, AND B 169158, APRIL 15, 1970, COPIES ENCLOSED, THAT THE REVISION PRECLUDED PAYMENT OF SUCH FEES INCURRED AFTER JULY 1, 1969. SEE B-168675, FEBRUARY 17, 1970, COPY ENCLOSED. IN ADDITION IN THOSE DECISIONS WE SPECIFICALLY HELD THAT A LOAN ASSUMPTION FEE, A LOAN ORIGINATION FEE, AND A LOAN TRANSFER FEE ARE REGARDED AS FINANCE CHARGES UNDER REGULATION Z OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (12 CFR, PART 226), PUBLISHED FEBRUARY 11, 1969, 34 FR 2002 ET SEQ. EFFECTIVE JULY 1, 1969, IMPLEMENTING THE TRUTH IN LENDING ACT.

SINCE THE ABOVE DECISIONS DID NOT INVOLVE A FLAT FEE PURPORTEDLY CHARGED ONLY FOR ADMINISTRATIVE COSTS, WE INFORMALLY CONTACTED AN OFFICIAL OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WHO ADVISED US THAT A LOAN ASSUMPTION FEE ON A FLAT FEE BASIS, SUCH AS HERE INVOLVED, IS REGARDED AS A FINANCE CHARGE, NOTWITHSTANDING THE ASSERTION THAT SUCH A FEE MERELY COVERS ADMINISTRATIVE COSTS.

ACCORDINGLY, WE FIND NO BASIS FOR CERTIFICATION OF THE VOUCHER HERE INVOLVED.

THE VOUCHER AND RELATED PAPERS ARE RETURNED HEREWITH.