B-174065, NOV 19, 1971

B-174065: Nov 19, 1971

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THE CREDITING TO DEFERRED INCOME BY THE LENDER OVER A PERIOD OF YEARS OF A PART OF A LOAN ORIGINATION FEE APPEARS TO BE IN THE NATURE OF A DISCOUNT OR "POINTS" AND IS THUS NOT REIMBURSABLE UNDER SECTION 4.2D OF OMB CIRCULAR NO. MORERA WAS REIMBURSED FOR AN INITIAL SERVICE CHARGE OF $522 APPEARING ON A LOAN SETTLEMENT STATEMENT - PRESUMABLY RELATED TO THE PURCHASE OF A RESIDENCE BY DR. YOU CONTINUE THAT YOU LATER LEARNED THAT $261 OF THE $522 INITIAL SERVICE CHARGE WAS CREDITED BY THE LENDER TO DEFERRED INCOME EXTENDING OVER 7 YEARS. " THAT IS. A PART OF THE PRICE FOR THE HIRE OF MONEY WHICH IS NOT REIMBURSABLE UNDER THE REGULATIONS. AS YOU ARE AWARE. INCLUDED IN THE AUTHORIZED REIMBURSEMENT OF REAL ESTATE EXPENSES INCIDENT TO A PERMANENT CHANGE OF STATION FEES FOR LOAN APPLICATIONS AND LENDER'S LOAN ORIGINATIONS WHEREAS MORTGAGE DISCOUNTS "POINTS" AND INTEREST ON LOANS WERE NOT REIMBURSABLE.

B-174065, NOV 19, 1971

CIVILIAN EMPLOYEE - PURCHASE OF RESIDENCE - DEFERRED INCOME AS "POINTS" DECISION THAT COLLECTION ACTION SHOULD BE TAKEN AGAINST DR. JULIO MORERA IN THE AMOUNT OF $261, REPRESENTING MONIES PAID INCIDENT TO A PURCHASE OF RESIDENCE FOLLOWING A PERMANENT CHANGE OF STATION. THE CREDITING TO DEFERRED INCOME BY THE LENDER OVER A PERIOD OF YEARS OF A PART OF A LOAN ORIGINATION FEE APPEARS TO BE IN THE NATURE OF A DISCOUNT OR "POINTS" AND IS THUS NOT REIMBURSABLE UNDER SECTION 4.2D OF OMB CIRCULAR NO. A-56, PRIOR TO JUNE 26, 1969. ACCORDINGLY, COLLECTION ACTION SHOULD BE TAKEN TO RECOVER THAT PORTION OF THE INITIAL SERVICE CHARGE WHICH REPRESENTS DEFERRED INCOME.

TO DR. THOMAS L. HARVEY:

WE REFER FURTHER TO YOUR LETTER OF SEPTEMBER 1, 1971, CONCERNING THE REIMBURSEMENT OF CLAIMED REAL ESTATE EXPENSES TO DR. JULIO MORERA, INCURRED IN JANUARY 1969.

YOU STATE THAT DR. MORERA WAS REIMBURSED FOR AN INITIAL SERVICE CHARGE OF $522 APPEARING ON A LOAN SETTLEMENT STATEMENT - PRESUMABLY RELATED TO THE PURCHASE OF A RESIDENCE BY DR. MORERA INCIDENT TO PERMANENT CHANGE OF DUTY. YOU INDICATE THAT SUCH REIMBURSEMENT ACCORDED WITH THE REGULATIONS APPLICABLE AT THAT TIME - SECTION 4.2D, BUREAU OF THE BUDGET CIRCULAR NO. A-56, REVISED OCTOBER 12, 1966 (NOW OFFICE OF MANAGEMENT AND BUDGET).

YOU CONTINUE THAT YOU LATER LEARNED THAT $261 OF THE $522 INITIAL SERVICE CHARGE WAS CREDITED BY THE LENDER TO DEFERRED INCOME EXTENDING OVER 7 YEARS. IN THE CIRCUMSTANCES YOU FEEL THE AMOUNT REPRESENTING DEFERRED INCOME MIGHT BE CONSIDERED IN THE NATURE OF A DISCOUNT OR "POINTS," THAT IS, A PART OF THE PRICE FOR THE HIRE OF MONEY WHICH IS NOT REIMBURSABLE UNDER THE REGULATIONS. YOU ASK WHETHER THE $261 REPRESENTING DEFERRED INCOME SHOULD BE COLLECTED FROM DR. MORERA.

AS YOU ARE AWARE, SECTION 4.2D OF CIRCULAR NO. A-56 PRIOR TO JUNE 26, 1969, INCLUDED IN THE AUTHORIZED REIMBURSEMENT OF REAL ESTATE EXPENSES INCIDENT TO A PERMANENT CHANGE OF STATION FEES FOR LOAN APPLICATIONS AND LENDER'S LOAN ORIGINATIONS WHEREAS MORTGAGE DISCOUNTS "POINTS" AND INTEREST ON LOANS WERE NOT REIMBURSABLE. WE HAVE HELD THAT THE CREDITING TO DEFERRED INCOME BY THE LENDER OVER A PERIOD OF YEARS OF A PART OF A LOAN ORIGINATION FEE APPEARS TO BE IN THE NATURE OF A DISCOUNT OR "POINTS," THAT IS, A PART OF THE PRICE FOR THE HIRE OF THE MONEY LOANED. SEE B-162494, OCTOBER 26, 1967, AND B-167538, SEPTEMBER 4, 1969, COPIES ENCLOSED.

ACCORDINGLY, ACTION SHOULD BE TAKEN TO RECOVER FROM DR. MORERA THE $261 OF THE INITIAL SERVICE CHARGE WHICH REPRESENTED DEFERRED INCOME AS INDICATED ABOVE.