B-171557, MAR 11, 1971

B-171557: Mar 11, 1971

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IT IS TO BE REGARDED AS A FINANCE CHARGE AND NOT REIMBURSABLE UNDER SECTION 4.2D. KELLNER: FURTHER REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 3. WAS AN ITEM OF $50 MISCELLANEOUS COSTS DESCRIBED AS AN ASSUMPTION FEE. THIS ITEM WAS ADMINISTRATIVELY DELETED FROM HIS REIMBURSEMENT VOUCHER. TO THE EFFECT THAT THEY MUST COLLECT A $100 ASSUMPTION FEE OF WHICH $50 IS USED TO TRANSFER THEIR LOAN RECORDS AND $50 IS FOR RELEASE OF LIABILITY FROM THE FEDERAL HOUSING ADMINISTRATION (FHA). THAT THE SELLER WAS ASSESSED ONE-HALF OF THE ASSUMPTION FEE FOR RELEASE OF LIABILITY AND ASSUMING THE LOAN. WE HAVE HELD THAT A LOAN ASSUMPTION FEE IS SIMILAR TO A LOAN ORIGINATION FEE AND IS TO BE REGARDED AS A FINANCE CHARGE FOR WHICH REIMBURSEMENT IS PRECLUDED UNDER THE PROVISIONS OF SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO.

B-171557, MAR 11, 1971

REAL ESTATE EXPENSES - FINANCE CHARGES DECISION DENYING CLAIM BY CHARLES R. HUNTER FOR $50 REPRESENTING A FEE FOR "RELEASE FROM LIABILITY FROM THE F.H.A." IN CONNECTION WITH A REAL ESTATE TRANSACTION INCIDENT TO HIS CHANGE OF OFFICIAL STATION. A STATEMENT FROM THE FINANCING INSTITUTION THAT THEY MUST COLLECT A $100 ASSUMPTION FEE - $50 FOR THE TRANSFER OF LOAN RECORDS, PAID BY THE BUYER AND $50 FOR RELEASE OF LIABILITY FROM THE F.H.A. IN ORDER THAT SELLER CAN OBTAIN ANOTHER F.H.A. LOAN, PAID BY THE SELLER, DOES NOT CHANGE THE CHARACTER OF THE FEE. IT IS TO BE REGARDED AS A FINANCE CHARGE AND NOT REIMBURSABLE UNDER SECTION 4.2D, BOB CIR. NO. A-56.

TO MR. KARL J. KELLNER:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 3, 1970, REQUESTING A DECISION AS TO THE PROPRIETY FOR PAYMENT OF A VOUCHER FOR $50 IN FAVOR OF MR. CHARLES R. HUNTER, REPRESENTING A FEE FOR "RELEASE FROM LIABILITY FROM THE F.H.A." IN CONNECTION WITH A REAL ESTATE TRANSACTION INCIDENT TO HIS TRANSFER OF OFFICIAL STATION FROM BUTTE, MONTANA, TO MISSOULA, MONTANA.

INCLUDED IN THE EXPENSES INCURRED IN THE SALE OF HIS HOUSE IN BUTTE, MONTANA, FOR WHICH MR. HUNTER CLAIMED REIMBURSEMENT, WAS AN ITEM OF $50 MISCELLANEOUS COSTS DESCRIBED AS AN ASSUMPTION FEE. THIS ITEM WAS ADMINISTRATIVELY DELETED FROM HIS REIMBURSEMENT VOUCHER.

IN SUPPORT OF HIS RECLAIM OF THE ITEM OF $50 AS A REIMBURSABLE EXPENSE, MR. HUNTER HAS FURNISHED A STATEMENT FROM PRUDENTIAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF SALT LAKE CITY, UTAH, BUTTE BRANCH OFFICE, TO THE EFFECT THAT THEY MUST COLLECT A $100 ASSUMPTION FEE OF WHICH $50 IS USED TO TRANSFER THEIR LOAN RECORDS AND $50 IS FOR RELEASE OF LIABILITY FROM THE FEDERAL HOUSING ADMINISTRATION (FHA), IN ORDER THAT THE SELLER CAN OBTAIN ANOTHER FHA LOAN IN THE FUTURE. THE STATEMENT OF CLOSING COSTS INCIDENT TO THE SALE SHOWS THAT THE PURCHASER ASSUMED THE ORIGINAL MORTGAGE ON THE HOUSE, AND THAT THE SELLER WAS ASSESSED ONE-HALF OF THE ASSUMPTION FEE FOR RELEASE OF LIABILITY AND ASSUMING THE LOAN.

WE HAVE HELD THAT A LOAN ASSUMPTION FEE IS SIMILAR TO A LOAN ORIGINATION FEE AND IS TO BE REGARDED AS A FINANCE CHARGE FOR WHICH REIMBURSEMENT IS PRECLUDED UNDER THE PROVISIONS OF SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, REVISED JUNE 26, 1969. SEE B-168359, JANUARY 2, 1970; B-168870, FEBRUARY 13, 1970; AND B-169158, APRIL 15, 1970, COPIES ENCLOSED. WE HAVE ALSO HELD THAT A FEE CHARGED BY A LENDER FOR TRANSACTIONS IN CONNECTION WITH THE SALE BY AN ORIGINAL BORROWER TO AN INDIVIDUAL WHO TAKES SUBJECT TO, OR ASSUMES WITH RELEASE OF LIABILITY, THE EXISTING MORTGAGE, ACTUALLY REPRESENTS A CHARGE FOR "ASSUMPTION" OF THE MORTGAGE BY THE PURCHASER. SEE B 170495, DECEMBER 18, 1970, COPY ENCLOSED.

WE DO NOT VIEW THE SPLITTING OF THE TRANSFER FEE BETWEEN THE BUYER AND THE SELLER AS CHANGING THE CHARACTER OF THE FEE. ACCORDINGLY, AND SINCE AN ASSUMPTION FEE IS TO BE REGARDED AS A FINANCE CHARGE WE FIND NO BASIS FOR PAYMENT OF MR. HUNTER'S CLAIM.

THE VOUCHER IS RETURNED HEREWITH AND MAY NOT BE CERTIFIED FOR PAYMENT.