B-183177, MAR 17, 1975

B-183177: Mar 17, 1975

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A TRANSFERRED FAA EMPLOYEE WAS CHARGED $620 AS A LOAN ORIGINATION FEE INCIDENT TO THE PURCHASE OF A RESIDENCE AT HIS NEW STATION. UNDER OMB CIRCULAR A-56 FINANCE CHARGES UNDER THE TRUTH IN LENDING ACT ARE NOT REIMBURSABLE. THE AMOUNT OF $559.84 IS NOT REIMBURSABLE SINCE IT IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT AND REGULATION Z. THE COSTS OF THE APPRAISAL AND CREDIT REPORT ARE REIMBURSABLE SINCE THEY ARE EXCLUDED IN THE COMPUTATION OF THE FINANCE CHARGE. GAGNON WAS AUTHORIZED A PERMANENT CHANGE OF DUTY STATION FROM SEATTLE. WAS DISALLOWED BY FAA. CREDIT REPORT COST) WAS ALLOWED. THE REMAINING $559.84 FOR WHICH REIMBURSEMENT IS NOW SOUGHT WAS DISALLOWED AS IT CONSTITUTES A LOAN ORIGINATION FEE WHICH A LENDING INSTITUTION IS ALLOWED TO CHARGE FOR PROCESSING A LOAN UNDER REGULATIONS FOR THE FEDERAL SAVINGS AND LOAN SYSTEM.

B-183177, MAR 17, 1975

A TRANSFERRED FAA EMPLOYEE WAS CHARGED $620 AS A LOAN ORIGINATION FEE INCIDENT TO THE PURCHASE OF A RESIDENCE AT HIS NEW STATION. THE $620 FEE INCLUDED AN APPRAISAL COST ($43) AND A CREDIT REPORT ($17.16). UNDER OMB CIRCULAR A-56 FINANCE CHARGES UNDER THE TRUTH IN LENDING ACT ARE NOT REIMBURSABLE. THE AMOUNT OF $559.84 IS NOT REIMBURSABLE SINCE IT IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT AND REGULATION Z. THE COSTS OF THE APPRAISAL AND CREDIT REPORT ARE REIMBURSABLE SINCE THEY ARE EXCLUDED IN THE COMPUTATION OF THE FINANCE CHARGE.

GEORGE W. GAGNON - LOAN ORIGINATION FEE:

THIS ACTION RESULTS FROM AN APPEAL FROM OUR TRANSPORTATION AND CLAIMS DIVISION'S SETTLEMENT, DATED DECEMBER 12, 1974, WHICH DISALLOWED, IN PART, THE CLAIM OF MR. GEORGE W. GAGNON FOR REIMBURSEMENT OF COSTS INCURRED INCIDENT TO A TRANSFER OF STATION FOR HIS PURCHASE OF A RESIDENCE AT HIS NEW DUTY STATION.

THE RECORD INDICATES MR. GAGNON WAS AUTHORIZED A PERMANENT CHANGE OF DUTY STATION FROM SEATTLE, WASHINGTON, TO AUBURN, WASHINGTON, AS AN EMPLOYEE OF THE FEDERAL AVIATION ADMINISTRATION (FAA). HE SUBMITTED A CLAIM FOR REIMBURSEMENT OF REAL ESTATE EXPENSES IN CONNECTION WITH THE PURCHASE OF A HOME AT THE NEW DUTY STATION. THE AMOUNT OF $620, IDENTIFIED AS A "PREPAID FINANCE CHARGE-ORIGINATION OR LOAN FEE" ON THE DISCLOSURE STATEMENT ISSUED BY THE WESTSIDE FEDERAL SAVINGS AND LOAN ASSOCIATION (THE LENDER), WAS DISALLOWED BY FAA. UPON SUBMISSION TO OUR OFFICE THE AMOUNT OF $60.16 ($43, APPRAISAL COST PLUS $17.16, CREDIT REPORT COST) WAS ALLOWED. THE REMAINING $559.84 FOR WHICH REIMBURSEMENT IS NOW SOUGHT WAS DISALLOWED AS IT CONSTITUTES A LOAN ORIGINATION FEE WHICH A LENDING INSTITUTION IS ALLOWED TO CHARGE FOR PROCESSING A LOAN UNDER REGULATIONS FOR THE FEDERAL SAVINGS AND LOAN SYSTEM.

MR. GAGNON'S ORIGINAL CLAIM FOR REIMBURSEMENT INDICATES THAT THE PURCHASE OF HIS RESIDENCE WAS CLOSED APRIL 23, 1973. THEREFORE, THE CLAIM SETTLEMENT SHOULD HAVE REFERRED TO OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, REVISED EFFECTIVE SEPTEMBER 1, 1971, INSTEAD OF THE FEDERAL TRAVEL REGULATIONS. HOWEVER, THIS WILL NOT AFFECT THE OUTCOME SINCE THE PERTINENT PROVISION WAS NOT CHANGED. SECTION 4.2D OF CIRCULAR A -56 READS IN 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 THAT PROVISION REIMBURSEMENT OF AN ITEM OF EXPENSE INCIDENT TO A REAL ESTATE TRANSACTION WHICH CONSTITUTES A FINANCE CHARGE WITHIN THE CONTEMPLATION OF REGULATION Z IS PRECLUDED. SECTION 106 OF THE TRUTH IN LENDING ACT, 15 U.S.C. SEC. 1605 (1970), READS IN PART 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:

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

"(2) SERVICE OR CARRYING CHARGE.

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

"(4) FEE FOR AN INVESTIGATION OR CREDIT REPORT.

"(5) PREMIUM OR OTHER CHARGE FOR ANY GUARANTEE OR INSURANCE PROTECTING THE CREDITOR AGAINST THE OBLIGOR'S DEFAULT OR OTHER CREDIT LOSS.

"(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 PREMIUM 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 (12 C.F.R., PART 226) WAS PROMULGATED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM PURSUANT TO THE TRUTH IN LENDING ACT, AND SETS FORTH THE FOREGOING IN SUBSTANTIALLY THE SAME FORM.

THE ITEM HERE INVOLVED RELATES TO THE APPLICATION, PROCESSING AND SERVICING OF MR. GAGNON'S LOAN AND IS CLEARLY A "LOAN FEE" WITHIN THE MEANING OF SECTION 106(A)(3) OF THE TRUTH IN LENDING ACT. MOREOVER, IT IS NOT A FEE THAT SHALL NOT BE INCLUDED IN THE COMPUTATION OF THE FINANCE CHARGE UNDER THE PROVISIONS OF 106(E)(5) AND (6). THEREFORE, THE AMOUNT OF $559.84 MAY NOT BE REIMBURSED. THE RECORD CONTAINS A COPY OF A LETTER FROM THE LENDING INSTITUTION TO THE CLAIMANT DATED JULY 27, 1973, WHICH STATES THAT THE $620 FEE INCLUDED $43, COST OF APPRAISAL, AND $17.16, CREDIT REPORT. THOSE ITEMS ARE SPECIFICALLY EXCLUDED BY LAW FROM THE COMPUTATION OF THE FINANCE CHARGE. ALSO, SECTION 4.2D OF CIRCULAR A-56 PROVIDES FOR REIMBURSEMENT OF CREDIT REPORTS AND SIMILAR FEES. THEREFORE, THE COSTS OF THE CREDIT REPORT AND APPRAISAL WERE PROPERLY REIMBURSED.

ACCORDINGLY, THE SETTLEMENT OF DECEMBER 12, 1974, IS SUSTAINED.