B-177636, MAR 13, 1973

B-177636: Mar 13, 1973

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AN APPRAISAL FEE FOR AN FHA LOAN APPLICATION IS NOT CONSIDERED A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT. THEREFORE IT IS A REIMBURSEABLE EXPENSE UNDER OMB CIRCULAR. ADVERTISING EXPENSES ARE NOT REIMBURSEABLE UNDER SECTIONS 4.2A AND B IF A BROKER'S FEE WHICH INCLUDES THE COST OF ADVERTISING IS ALSO CLAIMED. EVEN IF SUCH EXPENSES WERE INCURRED BY THE EMPLOYEE PURSUANT TO HIS OWN SELLING EFFORTS PRIOR TO ENGAGING A BROKER. 46 COMP. COSTS INCURRED INCIDENT TO THE PROVISION OF AN OWNER'S TITLE POLICY FOR THE OLD RESIDENCE ARE ALLOWABLE UNDER SECTION 4.2C. THE COST OF MORTGAGE GUARANTEE INSURANCE IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT AND. IS NOT REIMBURSABLE UNDER SECTION 4.2D.

B-177636, MAR 13, 1973

CIVILIAN EMPLOYEE - REAL ESTATE EXPENSES - CHANGE OF STATION DECISION ALLOWING IN PART THE CLAIM OF CHARLES J. RAY, AN EMPLOYEE OF THE BUREAU OF NARCOTICS AND DANGEROUS DRUGS, FOR REIMBURSEMENT OF CERTAIN REAL ESTATE EXPENSES INCURRED IN THE PURCHASE AND SALE OF RESIDENCES IN CONNECTION WITH HIS TRANSFER FROM ALBUQUERQUE, N.M., TO DENVER, COL. AN APPRAISAL FEE FOR AN FHA LOAN APPLICATION IS NOT CONSIDERED A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, SEE 12 CFR 226.4(E), AND THEREFORE IT IS A REIMBURSEABLE EXPENSE UNDER OMB CIRCULAR, NO. A-56, SECTION 4.2D. HOWEVER, ADVERTISING EXPENSES ARE NOT REIMBURSEABLE UNDER SECTIONS 4.2A AND B IF A BROKER'S FEE WHICH INCLUDES THE COST OF ADVERTISING IS ALSO CLAIMED, EVEN IF SUCH EXPENSES WERE INCURRED BY THE EMPLOYEE PURSUANT TO HIS OWN SELLING EFFORTS PRIOR TO ENGAGING A BROKER. 46 COMP. GEN. 812 (1967). ALSO, COSTS INCURRED INCIDENT TO THE PROVISION OF AN OWNER'S TITLE POLICY FOR THE OLD RESIDENCE ARE ALLOWABLE UNDER SECTION 4.2C. SEE 46 COMP. GEN. 884 (1967). HOWEVER, THE COST OF MORTGAGE GUARANTEE INSURANCE IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT AND, THEREFORE, IS NOT REIMBURSABLE UNDER SECTION 4.2D. SEE B-169477, JUNE 2, 1970. ALSO, A FEE FOR A TAX CERTIFICATE NEEDED FOR DOCUMENTATION INCIDENT TO THE PURCHASE OF A NEW RESIDENCE IS REIMBURSABLE UNDER SECTION 4.2C. FINALLY, A TAX SERVICE CHARGE PAID FOR THE LENDER INCIDENT TO THE PURCHASE OF THE NEW RESIDENCE IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, SEE 12 CFR 226.4, AND IS NOT REIMBURSABLE UNDER SECTION 4.2D. SEE 49 COMP. GEN. 483, 486 (1970).

TO MR. CARL E. FANUCCI:

WE REFER TO YOUR LETTER DATED DECEMBER 5, 1972, WITH ENCLOSURES, REQUESTING OUR DECISION WHETHER THE ENCLOSED VOUCHERS OF MR. CHARLES J. RAY, AN EMPLOYEE OF THE UNITED STATES DEPARTMENT OF JUSTICE, MAY BE CERTIFIED FOR PAYMENT UNDER THE CIRCUMSTANCES HEREINAFTER DESCRIBED.

THE VOUCHERS INVOLVED COVER CERTAIN OF THE EXPENSES MR. RAY INCURRED IN THE PURCHASE AND SALE OF RESIDENCES IN CONNECTION WITH HIS TRANSFER FROM ALBUQUERQUE, NEW MEXICO, TO DENVER, COLORADO, UNDER A TRAVEL AUTHORIZATION DATED MAY 14, 1971, WHICH WERE DISALLOWED ON HIS ORIGINAL VOUCHER. SUMMARIZED BY YOUR LETTER OF DECEMBER 5, 1972, THE ITEMS FOR WHICH MR. RAY IS NOW SEEKING REIMBURSEMENT ARE:

1. SALE OF OLD RESIDENCE

A. APPRAISAL FEE $ 40.00

B. ADVERTISING COST WHICH WAS PAID IN

ADDITION TO A BROKER'S COMMISSION 24.45

C. OWNER'S TITLE POLICY WHICH EMPLOYEE STATES

SUBSTITUTES FOR AN ABSTRACT OF TITLE 167.62

2. PURCHASE OF NEW RESIDENCE

A. MGIC PREMIUM AND COMMITMENT FEE $134.75

B. TAX CERTIFICATE 3.00

C. TAX SERVICE 12.00

WITH REGARD TO THE $40 "APPRAISAL FEE", THE FILE SHOWS THAT THIS CHARGE WAS FOR AN FHA LOAN APPLICATION. SINCE THAT FEE COVERS THE COST OF AN APPRAISAL AS WELL AS A CONDITIONAL COMMITMENT BY FHA TO INSURE A MORTGAGE UNDER THE NATIONAL HOUSING ACT IT IS NOT CONSIDERED A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, WHICH SPECIFICALLY PROVIDES THAT APPRAISAL FEES CHARGED IN CONNECTION WITH REAL ESTATE TRANSACTIONS WILL NOT BE CONSIDERED FINANCE CHARGES. SEE 12 CFR 226.4(E). SEE ALSO SECTION 4.2D, OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56. ACCORDINGLY MR. RAY IS ENTITLED TO REIMBURSEMENT FOR THIS ITEM AS CLAIMED.

THE RECORD INDICATES THAT MR. RAY INCURRED A COST OF $24.45 FOR ADVERTISING BEFORE HE ENGAGED THE SERVICES OF A REAL ESTATE BROKER TO SELL HIS RESIDENCE AT HIS OLD STATION. WE HAVE CONSISTENTLY HELD THAT ADVERTISING EXPENSES ARE NOT REIMBURSABLE UNDER SECTIONS 4.2A AND B OF CIRCULAR NO. A-56 WHEN A BROKER'S FEE WHICH INCLUDES THE COST OF ADVERTISING IS ALSO CLAIMED. THIS IS TRUE EVEN WHEN SUCH COSTS ARE INCURRED BY THE EMPLOYEE IN AN ATTEMPT TO SELL THE RESIDENCE HIMSELF BEFORE HE DECIDES TO SECURE THE SERVICES OF A REAL ESTATE AGENT OR BROKER. 46 COMP. GEN. 812 (1967); B-169392, JUNE 25, 1970, COPY ENCLOSED. ACCORDINGLY THE ADVERTISING COSTS CLAIMED MAY NOT BE REIMBURSED TO MR. RAY.

THE COSTS MR. RAY INCURRED INCIDENT TO HIS SUPPLYING AN OWNER'S TITLE POLICY TO THE BUYER OF HIS RESIDENCE AT THE OLD DUTY STATION ARE ALLOWABLE UNDER SECTION 4.2C OF CIRCULAR NO. A-56. SEE ALSO 46 COMP. GEN. 884 (1967); 47 ID. 559 (1968).

THE ITEM RELATING TO THE "MGIC PREMIUM AND COMMITMENT FEE" APPARENTLY COVERS THE COST OF MORTGAGE GUARANTEE INSURANCE. IT HAS BEEN DETERMINED THAT SUCH COSTS ARE A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT AND THEREFORE ARE NOT REIMBURSABLE AS PROVIDED IN SECTION 4.2D OF CIRCULAR NO. A-56. SEE B-169477, JUNE 2, 1970, COPY ENCLOSED.

CONCERNING THE CLAIM FOR $3 FOR A TAX CERTIFICATE, APPARENTLY THIS CHARGE REPRESENTS A FEE FOR DOCUMENTATION INCIDENT TO THE PURCHASE OF THE DWELLING AT MR. RAY'S NEW DUTY STATION. IF THIS IS SO THE COST IS REIMBURSABLE UNDER SECTION 4.2C ABOVE.

AS TO THE TAX SERVICE CHARGE OF $12 ($12.50 ON THE CLOSING DOCUMENT), MR. RAY INDICATES THAT THIS REPRESENTS THE CHARGE FOR "A SERVICE USED BY THE LENDER TO KEEP TRACK OF TAXES ON THE MORTGAGE." IF THIS ACCURATELY REPRESENTS THE NATURE OF THIS FEE IT IS A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, SINCE UNDER THAT ACT AND REGULATION Z OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM, SERVICE CHARGES PAID BY THE BORROWER ARE PART OF THE FINANCE CHARGE. SEE 12 CFR 226.4. WITH RESPECT TO THIS ITEM AND THE TAX CERTIFICATE ITEM DISCUSSED ABOVE SEE 49 COMP. GEN. 483, 486 (1970); AND B-177306, JANUARY 2, 1973, COPY HEREWITH. THE BASIS OF THE INFORMATION PROVIDED THE $12 ($12.50) CHARGE FOR "TAX SERVICE" IS NOT REIMBURSABLE.

THE VOUCHER WITH ACCOMPANYING PAPERS IS RETURNED HEREWITH FOR HANDLING IN ACCORDANCE WITH THE FOREGOING.