B-173082, JUL 20, 1971

B-173082: Jul 20, 1971

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AS THE FEE APPEARS TO BE A FINANCE CHARGE WITHIN THE MEANING OF THE TRUTH IN LENDING ACT AND REGULATION Z OF THE INTERNAL REVENUE CODE REIMBURSEMENT IS PRECLUDED BY OMB CIRCULAR A-56 (SECTION 4.2D). SPERLING: FURTHER REFERENCE IS MADE TO YOUR LETTER OF MAY 21. THE ORIGINAL FHA APPRAISAL HAS INCLUDED IN IT A $450 FOR THIS PURPOSE AND IS INCLUDED IN THE AMOUNT THAT FHA WOULD LOAN ON THE PROPERTY.". THE ABOVE-QUOTED STATEMENT ON THE RECLAIM VOUCHER APPEARS TO RECOGNIZE THAT A $450 LOAN COST WOULD BE INVOLVED AND MAY REASONABLY BE VIEWED AS INDICATING THAT WHAT IS HERE CONCERNED IS A COST IN THE NATURE OF OR IN FACT A LOAN FEE OR SIMILAR CHARGE. SECTION 4.2D OF THAT CIRCULAR PROVIDES IN PERTINENT PART AS FOLLOWS: "THE FOLLOWING EXPENSES ARE REIMBURSABLE WITH RESPECT TO THE SALE OF *** RESIDENCES IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION *** TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY PAID IN THE LOCALITY OF THE RESIDENCE: FHA OR VA FEE FOR LOAN APPLICATION.

B-173082, JUL 20, 1971

CIVILIAN EMPLOYEE - CHANGE OF STATIONS - SELLING RESIDENCE DECISION DISALLOWING CLAIM OF MR. ROBERT E. CRUSIE, EMPLOYEE OF THE FEDERAL MEDIATION AND CONCILIATION SERVICE FOR REIMBURSEMENT OF "BUYERS LOAN COST" IN THE AMOUNT OF $435.13 ON THE SALE OF CLAIMANT'S HOME AT HIS OLD DUTY STATION. AS THE FEE APPEARS TO BE A FINANCE CHARGE WITHIN THE MEANING OF THE TRUTH IN LENDING ACT AND REGULATION Z OF THE INTERNAL REVENUE CODE REIMBURSEMENT IS PRECLUDED BY OMB CIRCULAR A-56 (SECTION 4.2D).

TO MISS ROSE M. SPERLING:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MAY 21, 1971, WITH ENCLOSURES, IN WHICH YOU REQUEST AN ADVANCE DECISION ON A RECLAIM VOUCHER SUBMITTED BY MR. ROBERT E. CRUSIE, AN EMPLOYEE OF YOUR SERVICE. THE RECLAIM VOUCHER REPRESENTS THE AMOUNT ADMINISTRATIVELY SUSPENDED FOR "BUYERS LOAN COST" ON THE SALE OF THE EMPLOYEE'S RESIDENCE AT HIS OLD OFFICIAL STATION.

THE RECORD INDICATES THAT AS SELLER MR. CRUSIE ENTERED INTO A PURCHASE AGREEMENT WHICH PROVIDED BY ITS TERMS THAT "FHA LOAN COST TO BE PAID BY SELLER." A COPY OF HIS INITIAL APPLICATION FOR REIMBURSEMENT OF EXPENSES INCURRED UPON THE SALE OF RESIDENCE DESIGNATES THE AMOUNT IN QUESTION - $435.13 - AS "BUYERS LOAN COSTS." THE LANGUAGE USED TO DESCRIBE THE SAME AMOUNT IN MR. CRUSIE'S RECLAIM VOUCHER STATES: "THE ENCLOSED PURCHASE AGREEMENT CALLS FOR THE SELLER TO PAY THE FHA LOAN COSTS. THE ORIGINAL FHA APPRAISAL HAS INCLUDED IN IT A $450 FOR THIS PURPOSE AND IS INCLUDED IN THE AMOUNT THAT FHA WOULD LOAN ON THE PROPERTY." A COPY OF THE REALTY COMPANY'S RECEIPTED INVOICE TO MR. CRUSIE IDENTIFIES THE $435.13 AS "FHA LOAN COSTS - CUSTOMARILY PAID BY SELLER." YOUR QUESTION IN THE MATTER APPEARS TO ARISE FROM THE MEANING TO BE GIVEN THE TERM "FHA LOAN COST."

THE ABOVE-QUOTED STATEMENT ON THE RECLAIM VOUCHER APPEARS TO RECOGNIZE THAT A $450 LOAN COST WOULD BE INVOLVED AND MAY REASONABLY BE VIEWED AS INDICATING THAT WHAT IS HERE CONCERNED IS A COST IN THE NATURE OF OR IN FACT A LOAN FEE OR SIMILAR CHARGE.

UNDER THE GENERAL STATUTORY AUTHORITY CONTAINED IN 5 U.S.C. 5724, THE PRESIDENT HAS ISSUED OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, AS REVISED JUNE 26, 1969. SECTION 4.2D OF THAT CIRCULAR PROVIDES IN PERTINENT PART AS FOLLOWS:

"THE FOLLOWING EXPENSES ARE REIMBURSABLE WITH RESPECT TO THE SALE OF *** RESIDENCES IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION *** TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY PAID IN THE LOCALITY OF THE RESIDENCE: FHA OR VA FEE FOR LOAN APPLICATION; COSTS OF PREPARING CREDIT REPORTS; MORTGAGE AND TRANSFER TAXES; STATE REVENUE STAMPS; AND SIMILAR FEES AND CHARGES. *** 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. *** "

BY DIRECT APPLICATION OF THE ABOVE PROVISION IT IS CLEAR THAT A FEE FOR AN FHA LOAN APPLICATION WOULD BE REIMBURSABLE IF SUCH A FEE IS CUSTOMARILY PAID BY THE SELLER AND IF IT DOES NOT EXCEED THE FEE REQUIRED BY FHA FOR THAT TYPE OF INSURED LOAN. SUCH FEES HOWEVER ARE $35 FOR EXISTING CONSTRUCTION, AND HENCE THE AMOUNT ON THE RECLAIM VOUCHER CLEARLY COULD NOT BE AN FHA FEE FOR A LOAN APPLICATION. SEE B 169790, JULY 2, 1970, COPY ENCLOSED.

THE TRUTH IN LENDING ACT, REFERRED TO ABOVE, PROVIDES IN PART AT SECTION 106 (15 U.S.C. 1605) AS FOLLOWS:

"(A) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE AMOUNT OF THE FINANCE CHARGE IN CONNECTION WITH ANY CONSUMER CREDIT TRANSACTION SHALL BE DETERMINED AS THE SUM OF ALL CHARGES, PAYABLE DIRECTLY OR INDIRECTLY BY THE PERSON TO WHOM THE CREDIT IS EXTENDED, AND IMPOSED DIRECTLY OR INDIRECTLY BY THE CREDITOR AS AN INCIDENT TO THE EXTENSION OF CREDIT, INCLUDING ANY OF THE FOLLOWING TYPES OF CHARGES WHICH ARE APPLICABLE:

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

"(E) THE FOLLOWING ITEMS, WHEN CHARGED IN CONNECTION WITH ANY EXTENSION OF CREDIT SECURED BY AN INTEREST IN REAL PROPERTY, SHALL NOT BE INCLUDED IN THE COMPUTATION OF THE FINANCE CHARGE WITH RESPECT TO THAT TRANSACTION:

"(1) FEES OR PREMIUMS FOR TITLE EXAMINATION, TITLE INSURANCE, OR SIMILAR PURPOSES.

"(2) FEES FOR PREPARATION OF A DEED, SETTLEMENT STATEMENT, OR OTHER DOCUMENTS.

"(3) ESCROWS FOR FUTURE PAYMENTS OF TAXES AND INSURANCE.

"(4) FEES FOR NOTARIZING DEEDS AND OTHER DOCUMENTS.

"(5)APPRAISAL FEES.

"(6) CREDIT REPORTS."

REGULATION Z AS FOUND IN 12 CFR 226.4 FURTHER EXPLAINS THE ITEMS WHICH ARE REIMBURSABLE AND PROVIDES IN PART AS FOLLOWS:

"(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:

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

THE FOLLOWING CHARGES INVOLVED WITH ANY REAL PROPERTY TRANSACTION ARE EXPRESSLY EXCLUDED FROM BEING CONSIDERED A PART OF THE FINANCE CHARGE WITH RESPECT TO THAT TRANSACTION:

"(1) FEES OR PREMIUMS FOR TITLE EXAMINATION, ABSTRACT OF TITLE, TITLE INSURANCE, OR SIMILAR PURPOSES AND FOR REQUIRED RELATED PROPERTY SURVEYS.

"(2) FEES FOR PREPARATION OF DEEDS, SETTLEMENT STATEMENTS, OR OTHER DOCUMENTS.

"(3) AMOUNTS REQUIRED TO BE PLACED OR PAID INTO AN ESCROW OR TRUSTEE ACCOUNT FOR FUTURE PAYMENTS OF TAXES, INSURANCE, AND WATER, SEWER, AND LAND RENTS.

"(4) FEES FOR NOTARIZING DEEDS AND OTHER DOCUMENTS.

"(5) APPRAISAL FEES.

"(6) CREDIT REPORTS."

THE "BUYERS LOAN COST" CLAIMED BY MR. CRUSIE APPEARS TO BE A FINANCE CHARGE WITHIN THE TRUTH IN LENDING ACT AND REGULATION Z AND, THEREFORE, REIMBURSEMENT IS PRECLUDED BY SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, AS REVISED JUNE 26, 1969. CF. B-168384, JANUARY 6, 1970, COPY ENCLOSED.

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