B-176663, FEB 20, 1973

B-176663, FEB 20, 1973

CIVILIAN EMPLOYEE - CHANGE OF STATION - PURCHASE OF RESIDENCE - EXPENSES DECISION ALLOWING IN PART THE CLAIM OF ELIHU HURWITZ FOR REIMBURSEMENT OF CERTAIN REAL ESTATE EXPENSES INCURRED INCIDENT TO THE PURCHASE OF A RESIDENCE AT HIS NEW OFFICIAL STATION AFTER HIS TRANSFER FROM WASHINGTON, D.C., TO SAN FRANCISCO, CALIF. ALTHOUGH THE COST OF AN OWNER'S TITLE POLICY FOR THE PROTECTION OF THE PURCHASER OF A RESIDENCE IS NOT ORDINARILY REIMBURSABLE UNDER SECTION 4.2C OF OMB CIRCULAR NO. A-56, WHERE SUCH POLICY IS INCURRED BY THE PURCHASER AS A PREREQUISITE TO THE TRANSFER OF THE PROPERTY OR TO OBTAIN FINANCING INCIDENT TO SUCH TRANSFER, IT IS REIMBURSABLE IF IN THE AREA INVOLVED IT IS CUSTOMARILY PAID FOR BY THE PURCHASER. B 164867, SEPTEMBER 4, 1968. ALSO, AN ESCROW FEE IS REIMBURSABLE IF THERE IS NO INDICATION THAT ANY PART OF IT IS RELATED TO THE EXTENSION OF CREDIT. B-170007, JULY 13, 1970. HOWEVER, A LOAN INITIATION FEE CONSTITUTES A FINANCE CHARGE WITHIN THE CONTEMPLATION OF REGULATION 2 ISSUED PURSUANT TO THE TRUTH IN LENDING ACT, AND THEREFORE REIMBURSEMENT OF SUCH A FEE IS PRECLUDED BY OMB CIRCULAR NO. A-56, SECTION 4.2D.

TO MR. LEROY P. BOUCHER:

REFERENCE IS MADE TO YOUR LETTER DATED JULY 28, 1972, REQUESTING OUR DECISION AS TO WHETHER CERTAIN REAL ESTATE EXPENSES CLAIMED BY MR. ELIHU HURWITZ, INCURRED INCIDENT TO A CHANGE OF OFFICIAL DUTY STATION, MAY BE CERTIFIED FOR PAYMENT.

THE RECORD SHOWS THAT MR. HURWITZ, A FORMER EMPLOYEE OF THE GENERAL SERVICES ADMINISTRATION, WAS AUTHORIZED A CHANGE OF DUTY STATION FROM WASHINGTON, D.C., TO SAN FRANCISCO, CALIFORNIA, UNDER TRAVEL ORDER DATED JULY 7, 1971, FOR THE PURPOSE OF COMMENCING EMPLOYMENT WITH THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION. INCIDENT TO THIS CHANGE OF DUTY STATION, MR. HURWITZ PURCHASED A HOME IN SAN RAFAEL, CALIFORNIA. THE EXPENSES IN QUESTION ARE A LOAN INITIATION FEE OF $440 AND AN OWNER'S TITLE INSURANCE POLICY IN THE AMOUNT OF $334.05.

WITH RESPECT TO THE OWNER'S TITLE INSURANCE POLICY, SUBSEQUENT CORRESPONDENCE WITH THE FIRST AMERICAN TITLE COMPANY HAS REVEALED THAT THE AMOUNT OF $334.05 ACTUALLY REPRESENTS THE SUM OF THE FOLLOWING ITEMS:

CALIFORNIA LAND TITLE ASSOCIATION PREMIUM (CLTA)* : $232.00

AMERICAN LAND TITLE ASSOCIATION PREMIUM (ALTA) : 50.55

ESCROW FEE : 51.50

*ALSO REFERRED TO AS STANDARD TITLE INSURANCE

THE COST OF AN OWNER'S TITLE POLICY FOR THE PROTECTION OF THE PURCHASER OF A RESIDENCE IS NOT ORDINARILY REIMBURSABLE UNDER SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56 (CIRCULAR), REVISED AUGUST 17, 1971. HOWEVER, WHEN THE COST OF AN OWNER'S TITLE POLICY IS INCURRED BY THE PURCHASER AS A PREREQUISITE TO THE TRANSFER OF THE PROPERTY OR TO OBTAIN FINANCING INCIDENT TO SUCH TRANSFER, IT IS REIMBURSABLE IF IN THE AREA INVOLVED IT IS CUSTOMARILY PAID FOR BY THE PURCHASER. B-164867, SEPTEMBER 4, 1968; B-171041, DECEMBER 14, 1970. WE HAVE BEEN INFORMALLY ADVISED BY MR. CULPEPPER, AN ESCROW AGENT WITH THE ABOVE TITLE COMPANY, THAT THE CLTA POLICY IS FOR THE PROTECTION OF BOTH THE PURCHASER AND THE LENDER, WHEREAS THE ALTA POLICY IS FOR THE BENEFIT OF THE LENDER ONLY. MR. CULPEPPER FURTHER ADVISED THAT IN THE SAN FRANCISCO AREA (INCLUDING MARIN COUNTY) A PURCHASER MUST OBTAIN BOTH OF THESE POLICIES IN ORDER TO SECURE FINANCING, AND THAT THE POLICIES ARE CUSTOMARILY PAID FOR BY THE PURCHASER. THIS INFORMATION HAS BEEN CONFIRMED BY THE FEDERAL HOUSING ADMINISTRATION IN SAN FRANCISCO. MOREOVER, IN B-164867, SUPRA, WE NOTED THAT THE STANDARD TITLE POLICY (CLTA) "IS ISSUED AFTER A CAREFUL SEARCH OF PUBLIC RECORDS AND THE TITLE COMPANY INSURES THE OWNERSHIP OF THE LAND." BASED ON THIS, WE HELD THAT THE COST OF THIS TYPE OF POLICY MAY REASONABLY BE CONSIDERED AS THE COST OF SEARCHING TITLE, AS WELL AS A POLICY PROVIDING PROTECTION FOR THE LENDER, AND IS THEREFORE A REIMBURSABLE EXPENSE UNDER SECTION 4.2C OF THE CIRCULAR. ACCORDINGLY, THE COST OF THE SUBJECT TITLE INSURANCE PREMIUMS ($282.55) MAY BE REIMBURSED.

REGARDING THE ESCROW FEE OF $51.50, WE HAVE HELD THAT SUCH CHARGES ARE REIMBURSABLE WHEN THERE IS NO INDICATION THAT ANY PART THEREOF IS RELATED TO THE EXTENSION OF CREDIT. B-170007, JULY 13, 1970; B-162738, JANUARY 10, 1968; B-175374, APRIL 12, 1972. SINCE THERE IS NOTHING IN THE RECORD TO INDICATE THAT THE ESCROW FEE WAS INCIDENT TO THE EXTENSION OF CREDIT THIS ITEM IS FOR ALLOWANCE.

AS TO THE LOAN INITIATION FEE IN THE AMOUNT OF $440, SECTION 4.2D OF THE CIRCULAR STATES IN PERTINENT PART:

*** 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. ***

UNDER THIS PROVISION, WHENEVER AN ITEM OF EXPENSE INCIDENT TO A REAL ESTATE TRANSACTION CONSTITUTES A FINANCE CHARGE WITHIN THE CONTEMPLATION OF REGULATION Z, REIMBURSEMENT THEREOF IS PRECLUDED. REGULATION Z COVERING THE DETERMINATION OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT STATES IN PERTINENT PART (12 CFR 226.4) 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:

(1) INTEREST, TIME PRICE DIFFERENTIAL, AND ANY AMOUNT PAYABLE UNDER A DISCOUNT OR OTHER SYSTEM OF ADDITIONAL CHARGES.

(2) SERVICE, TRANSACTION, ACTIVITY, OR CARRYING CHARGE.

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

THE INITIAL LOAN FEE OF $440 APPEARS TO BE A FINANCE CHARGE WITHIN THE MEANING OF THE ABOVE PARAGRAPH, AS A CHARGE INCIDENT TO THE EXTENSION OF CREDIT, AND THEREFORE REIMBURSEMENT OF THIS FEE IS PRECLUDED. THE AMOUNT OF THE FEE IS DETERMINED ON A FIXED PERCENTAGE BASIS (1 PERCENT OF THE LOAN AMOUNT PLUS $100), WITHOUT REGARD TO THE TYPE OR EXTENT OF SERVICES ACTUALLY PERFORMED BY THE LENDER. WE NOTE MR. HURWITZ' CONTENTION THAT THE LOAN FEE INCLUDES CERTAIN FEES THAT ARE REIMBURSABLE. HOWEVER, THE AMOUNT OF THE TOTAL FEE ALLOCABLE TO THESE FEES HAS NOT BEEN SPECIFIED. IN THE ABSENCE OF SUCH ITEMIZATION, WE MAY NOT ALLOW REIMBURSEMENT OF ANY PORTION OF THE TOTAL FEE.

THE VOUCHER WITH RELATED PAPERS IS RETURNED HEREWITH FOR HANDLING IN ACCORDANCE WITH THE ABOVE.