B-201416, AUG 14, 1981

B-201416, AUG 14, 1981

DIGEST: IN CONNECTION WITH FARMERS HOME ADMINISTRATION GUARANTEED RURAL HOUSING LOAN, EMPLOYEE WAS REQUIRED TO REIMBURSE LENDER FOR FEE EQUAL TO ONE PERCENT OF PORTION OF LOAN WHICH WAS GUARANTEED. EMPLOYEE MAY NOT BE REIMBURSED FOR SUCH FEE SINCE IT APPEARS TO FALL WITHIN DEFINITION OF FINANCE CHARGE CONTAINED IN REGULATION Z, 12 C.F.R. SEC. 226.4A(7), AND IT IS MORE IN NATURE OF CHARGE FOR THE HIRE OF MONEY THAN REIMBURSEMENT OF ADMINISTRATIVE COSTS OF PROCESSING THE LOAN.

BERNARD P. BOBER - LOAN GUARANTEE FEE:

THIS IS IN RESPONSE TO A REQUEST FROM MR. KENNETH M. FROST, AN AUTHORIZED CERTIFYING OFFICER, AND ADMINISTRATIVE OFFICER, FARMERS HOME ADMINISTRATION, STEVENS POINT, WISCONSIN, FOR AN ADVANCE DECISION CONCERNING AN EMPLOYEE'S CLAIM FOR REIMBURSEMENT OF A GUARANTEE FEE HE WAS REQUIRED TO PAY WHEN HE OBTAINED A FARMERS HOME ADMINISTRATION GUARANTEED RURAL HOUSING LOAN. THE LENDER WAS APPARENTLY REQUIRED TO PAY A FEE EQUAL TO ONE PERCENT OF THE GUARANTEED PORTION OF THE LOAN. THE FEE WAS THEN PASSED ALONG TO THE EMPLOYEE, MR. BERNARD P. BOBER. MR. BOBER CONTENDS THAT HE IS ENTITLED TO REIMBURSEMENT OF THIS FEE BECAUSE IT IS SIMILAR TO FHA AND VA APPLICATION FEES WHICH ARE SPECIFICALLY REIMBURSABLE UNDER PARAGRAPH 2-6.2D OF THE FEDERAL TRAVEL REGULATIONS.

REIMBURSEMENT TO A FEDERAL EMPLOYEE FOR EXPENSES INCURRED INCIDENT TO THE PURCHASE OF A RESIDENCE AT THE TIME OF A PERMANENT CHANGE OF DUTY STATION IS GOVERNED BY CHAPTER 2 OF THE FEDERAL TRAVEL REGULATIONS. PARAGRAPH 2- 6.2D, WHICH DEFINES THOSE MISCELLANEOUS EXPENSES REIMBURSABLE IN CONNECTION WITH THE PURCHASE AND SALE OF RESIDENCES, PROHIBITS THE REIMBURSEMENT OF ANY FEE, COST, CHARGE, OR EXPENSE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUB.L. NO. 90-321, 15 U.S.C. SECS. 1601 ET. SEQ. (1976), AND REGULATION Z, 12 C.F.R. SEC. 226.4 (1980).

THE VERSION OF REGULATION Z IN EXISTENCE AT THE TIME MR. BOBER'S CLAIM AROSE, PROVIDES, IN PERTINENT PART, THAT:

"(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:

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

FROM THE RECORD BEFORE US IT APPEARS THAT THE FEE CHARGED TO MR. BOBER FALLS WITHIN SUBPARAGRAPH 7 AS A FEE PAID TO OBTAIN THE FARMERS HOME ADMINISTRATION'S GUARANTEE OF MR. BOBER'S LOAN.

IN ANY EVENT, THE FEE CHARGED TO MR. BOBER IS NOT REIMBURSABLE SINCE IT SEEMS TO BE A FLAT ONE PERCENT OF THE GUARANTEED AMOUNT. A FEE WHICH VARIES IN DIRECT PROPORTION TO THE AMOUNT BORROWED IS MORE IN THE NATURE OF A CHARGE FOR THE HIRE OF MONEY THAN REIMBURSEMENT FOR THE ADMINISTRATIVE COSTS OF PROCESSING A LOAN. IF SUCH A FEE COVERS SPECIFIC CHARGES FOR SERVICES PERFORMED BY THE LENDER WHICH WOULD OTHERWISE BE REIMBURSABLE, THERE MUST BE A SPECIFIC LIST OF THE SERVICES OR CHARGES WHICH COMPRISE THE FEE, AND AN ALLOCATION OF THE AMOUNT ATTRIBUTABLE TO EACH, AND ONLY THOSE ITEMS WHICH ARE SPECIFICALLY EXCLUDED FROM THE DEFINITION OF A FINANCE CHARGE BY 12 C.F.R. SEC. 226.4(E) (1980), MAY BE REIMBURSED. SEE ANTHONY J. VRANA, B-189639, MARCH 24, 1978. WE HAVE CONSISTENTLY HELD THAT UNITEMIZED CHARGES CHARACTERIZED AS ADMINISTRATIVE COSTS OR OVERHEAD EXPENSES ARE FINANCE CHARGES. MICHAEL C. FORREST, B-196402, JUNE 5, 1980.

MR. BOBER CONTENDS THAT THE FEE HE WAS REQUIRED TO PAY IS SIMILAR TO FHA AND VA FEES FOR LOAN APPLICATIONS. THE FHA AND VA FEES ARE NORMALLY PAID TO THE GOVERNMENT TO DEFRAY COSTS OF SUCH THINGS AS APPRAISALS AND CREDIT REPORTS. SEE B-169790, JULY 2, 1970; B-174106, OCTOBER 21, 1971. SINCE THE FEE PAID HERE HAS BEEN CHARACTERIZED AS A GUARANTEE FEE, IT IS NOT ANALOGOUS TO THE VA AND FHA APPLICATION FEES.

IT MAY BE THAT THE FEE MR. BOBER PAID COVERED SOME OF THE EXPENSES LISTED ABOVE. HOWEVER, ACCORDING TO OUR DECISIONS, HE MAY NOT BE REIMBURSED FOR ANY OF THAT AMOUNT UNLESS THERE IS AN ITEMIZATION OF THE ALLEGEDLY REIMBURSABLE ITEMS.