B-195826.OM, L/M, MAR 3, 1980

B-195826.OM: Mar 3, 1980

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CLAIMS DIVISION: RETURNED IS CLAIM FILE Z-2722414 PERTAINING TO THE CLAIM OF DAVID D. THE SUM OF $350 REPRESENTING ATTORNEY'S FEES FOR THE ATTORNEY RETAINED BY THE LENDING INSTITUTION WAS DENIED BY HIS AGENCY. THE AGENCY DENIAL WAS UPHELD IN A SETTLEMENT BY THE CLAIMS DIVISION DATED DECEMBER 18. FOR THE REASON THAT THE LEGAL SERVICES WERE NOT ITEMIZED. WHICH IS BASED ON A PERCENTAGE OF THE PRINCIPAL AMOUNT OF THE LOAN. ITEMIZATION WAS MADE OF THE CHARGES FOR EACH OF THESE SERVICES. IN THE PRESENT CASE IT APPEARS THAT THE ATTORNEY'S FEES IN QUESTION WERE ALL INCIDENT TO THE LAW FIRM'S SERVICES AND FEES IN CLOSING OF MORTGAGE LOAN TRANSACTIONS WITH CITIZENS FEDERAL SAVINGS AND LOAN ASSOCIATION.

B-195826.OM, L/M, MAR 3, 1980

SUBJECT: DAVID D. TUCKER - REAL ESTATE EXPENSES - B-195826-O.M.

DIRECTOR, CLAIMS DIVISION:

RETURNED IS CLAIM FILE Z-2722414 PERTAINING TO THE CLAIM OF DAVID D. TUCKER FOR REIMBURSEMENT OF CERTAIN EXPENSES UPON THE PURCHASE OF A RESIDENCE INCIDENT TO HIS TRANSFER FROM NASHVILLE, TENNESSEE, TO MIAMI, FLORIDA, IN FEBRUARY 1976.

MR. TUCKER FILED A CLAIM FOR THE CLOSING COSTS ON THE MORTGAGE LOAN TRANSACTION ON THE PURCHASE OF A HOME. THE SUM OF $350 REPRESENTING ATTORNEY'S FEES FOR THE ATTORNEY RETAINED BY THE LENDING INSTITUTION WAS DENIED BY HIS AGENCY, THE BUREAU OF ALCOHOL, TOBACCO AND FIREARMS. THE AGENCY DENIAL WAS UPHELD IN A SETTLEMENT BY THE CLAIMS DIVISION DATED DECEMBER 18, 1978, FOR THE REASON THAT THE LEGAL SERVICES WERE NOT ITEMIZED, CITING B-163690, MARCH 29, 1968.

IN APPEALING THAT SETTLEMENT MR. TUCKER HAS ENCLOSED A STATEMENT FROM THE LENDER'S ATTORNEY WHO PERFORMED THE SERVICES, STATING THAT THE FEE, WHICH IS BASED ON A PERCENTAGE OF THE PRINCIPAL AMOUNT OF THE LOAN, COVERED A TITLE EXAMINATION, PREPARATION OF ABSTRACT OF TITLE, THE RENDERING OF A TITLE OPINION, AND PREPARATION OF THE DEED AND MORTGAGE PAPERS. ITEMIZATION WAS MADE OF THE CHARGES FOR EACH OF THESE SERVICES.

IN THE PRESENT CASE IT APPEARS THAT THE ATTORNEY'S FEES IN QUESTION WERE ALL INCIDENT TO THE LAW FIRM'S SERVICES AND FEES IN CLOSING OF MORTGAGE LOAN TRANSACTIONS WITH CITIZENS FEDERAL SAVINGS AND LOAN ASSOCIATION. THESE SERVICES WERE NOT A PERSONAL SERVICE TO MR. TUCKER OF AN ADVISORY OR REPRESENTATIONAL NATURE BUT RATHER WERE NECESSARY EXPENSES IN PROCESSING THE LOAN TO FINANCE THE PURCHASE AND SHOULD BE CONSIDERED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN FEDERAL TRAVEL REGULATIONS, FPMR 101-7, PARA. 2-6.2D (MAY 1973) WHICH PROVIDES IN PERTINENT PART THAT:

"*** 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. ***"

SECTION 106 OF THE TRUTH IN LENDING ACT, TITLE 1, PUB. L. 90-321, 82 STAT. 146, 148-149, PROVIDES GUIDELINES FOR DETERMINING WHETHER A PARTICULAR CHARGE IS AN EXCLUDABLE EXPENSE OR A PART OF THE FINANCE CHARGE. 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 SUBSTANTIALLY THE SAME LIMITATIONS.

IN 58 COMP.GEN. , B-193318, SEPTEMBER 20, 1979, THE ATTORNEY'S FEES IN A SIMILAR SITUATION WERE CLAIMED TO BE A PART OF THE LOAN ORIGINATION FEE. WE HELD THAT ATTORNEY'S FEES PAID BY A LENDING INSTITUTION AND CHARGED TO THE BUYER MAY NOT BE PAID UNLESS THE CERTIFYING OFFICER DETERMINES THAT SUCH FEES WERE INCURRED FOR THE PURPOSES SPECIFICALLY EXCLUDED FROM FINANCE CHARGES BY REGULATION Z AND ARE REASONABLE IN AMOUNT. ANTHONY J. VRANA, B-189639, MARCH 24, 1978.

IN THIS CASE, SINCE THE LEGAL FEES CHARGED BY THE LENDING INSTITUTION ARE STATED TO BE FOR ITEMS EXCLUDED FROM THE COMPUTATION OF FINANCE CHARGES FOR AN EXTENSION OF CREDIT AS SET FORTH IN PARAGRAPH (E) OF REGULATION Z, IT IS REIMBURSABLE AS A REASONABLE AND NECESSARY COST FOR PURPOSES OF OBTAINING THE LOAN TO THE EXTENT THAT THE CHARGES DO NOT EXCEED AMOUNTS CUSTOMARILY CHARGED IN THE LOCALITY.

INFORMATION HAS BEEN SUPPLIED IN A TELEPHONE CONVERSATION WITH THE HOUSING AND URBAN DEVELOPMENT OFFICE IN CORAL GABLES, FLORIDA, THAT IN THE SOUTH FLORIDA AREA A CHARGE FOR ATTORNEY'S FEES BY THE LENDING INSTITUTION IS ALLOWABLE ON FHA AND VA INSURED LOANS WHEN CHARGED TO THE BUYER IF THE LEGAL SERVICES ARE NOT PERFORMED BY AN EMPLOYEE OF THE LENDING INSTITUTION. IN THIS CASE THE LEGAL SERVICES WERE PERFORMED BY THE LAW FIRM OF STUZIN AND CAMNER AND NOT BY AN EMPLOYEE OF THE LENDING INSTITUTION.

ACCORDINGLY, THE ATTORNEY'S FEE CHARGED TO THE LENDING INSTITUTION AND PASSED ON TO MR. TUCKER AS A CLOSING COST ON THE MORTGAGE LOAN TRANSACTION MAY BE PAID.