B-207051, SEP 28, 1982

B-207051: Sep 28, 1982

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WHICH WAS PAID BY THE EMPLOYEE-PURCHASER. A FEE WHICH VARIES IN DIRECT PROPORTION TO AMOUNT BORROWED IS MORE IN NATURE OF A CHARGE FOR THE HIRE OF MONEY. A LAND CONTRACT CONSENT FEE IS ESSENTIALLY THE SAME AS A LOAN ASSUMPTION FEE AND THE CLAIM MAY NOT BE PAID. LOAN ASSUMPTION FEES ARE CONSIDERED TO BE FINANCE CHARGES UNDER TRUTH IN LENDING ACT AND REGULATION Z. ARE NOT REIMBURSABLE. BISHOP - REAL ESTATE EXPENSES - LAND CONTRACT CONSENT FEE: THE ISSUE PRESENTED IS WHETHER A FEDERAL EMPLOYEE MAY BE REIMBURSED THE COST OF A LAND CONTRACT CONSENT FEE INCURRED INCIDENT TO THE PURCHASE OF A RESIDENCE AT HIS NEW DUTY STATION. THE PURCHASE WAS MADE INCIDENT TO MR. THE VOUCHER WAS DISALLOWED BY AN AUTHORIZED CERTIFYING OFFICER OF GAO BASED UPON INFORMATION INFORMALLY OBTAINED FROM THE LOCAL OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.

B-207051, SEP 28, 1982

DIGEST: TRANSFERRED EMPLOYEE PURCHASED RESIDENCE AT NEW DUTY STATION UNDER A LAND CONTRACT. SELLER'S LENDER ASSESSED CONSENT FEE OF $684, 1 PERCENT OF REMAINING MORTGAGE LOAN, WHICH WAS PAID BY THE EMPLOYEE-PURCHASER. A FEE WHICH VARIES IN DIRECT PROPORTION TO AMOUNT BORROWED IS MORE IN NATURE OF A CHARGE FOR THE HIRE OF MONEY. FURTHER, A LAND CONTRACT CONSENT FEE IS ESSENTIALLY THE SAME AS A LOAN ASSUMPTION FEE AND THE CLAIM MAY NOT BE PAID. LOAN ASSUMPTION FEES ARE CONSIDERED TO BE FINANCE CHARGES UNDER TRUTH IN LENDING ACT AND REGULATION Z, 12 C.F.R. SEC. 226.4(A) (1981), AND ARE NOT REIMBURSABLE.

TERRELL L. BISHOP - REAL ESTATE EXPENSES - LAND CONTRACT CONSENT FEE:

THE ISSUE PRESENTED IS WHETHER A FEDERAL EMPLOYEE MAY BE REIMBURSED THE COST OF A LAND CONTRACT CONSENT FEE INCURRED INCIDENT TO THE PURCHASE OF A RESIDENCE AT HIS NEW DUTY STATION. FOR THE REASONS SET FORTH BELOW, THE COST OF THE LAND CONTRACT CONSENT FEE MAY NOT BE REIMBURSED.

MR. TERRELL L. BISHOP, AN EMPLOYEE OF THE U. S. GENERAL ACCOUNTING OFFICE (GAO), CLAIMS REIMBURSEMENT OF A LAND CONTRACT CONSENT FEE INCURRED IN THE PURCHASE OF A RESIDENCE IN ENON, OHIO. THE PURCHASE WAS MADE INCIDENT TO MR. BISHOP'S PERMANENT CHANGE OF STATION FROM WASHINGTON, D. C., TO DAYTON, OHIO, IN NOVEMBER 1981.

MR. BISHOP SUBMITTED A RECLAIM VOUCHER IN THE AMOUNT OF $684 REPRESENTING THE COST OF THE LAND CONTRACT CONSENT FEE. THE VOUCHER WAS DISALLOWED BY AN AUTHORIZED CERTIFYING OFFICER OF GAO BASED UPON INFORMATION INFORMALLY OBTAINED FROM THE LOCAL OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FROM THE ATTORNEY WHO HANDLED THE SETTLEMENT ON THE PROPERTY, AND ALSO FROM A LETTER RECEIVED FROM THE SELLER'S LENDING INSTITUTION. BASED UPON THE FOREGOING INFORMATION, THE CERTIFYING OFFICER CONCLUDED THAT A LAND CONSENT FEE IS NOT A FEE USUALLY AND CUSTOMARILY PAID BY A PURCHASER OF A RESIDENCE IN THE DAYTON, OHIO, AREA.

THE PURCHASE OF A RESIDENCE UNDER A LAND CONTRACT IS SIMILAR IN NATURE TO SUCH PURCHASE UNDER A "LAND INSTALLMENT CONTRACT" AND A "CONTRACT FOR DEED" WHEREIN THE PURCHASER PAYS THE PURCHASE PRICE IN INSTALLMENTS AND OBTAINS EQUITABLE TITLE UPON THE EXECUTION OF THE CONTRACT. HE DOES NOT OBTAIN LEGAL TITLE TO THE PROPERTY UNTIL THE CONTRACT IS FULLY PAID. LARRY W. DAY, 57 COMP.GEN. 770 (1978); B-174644, APRIL 20, 1972; B-165146, SEPTEMBER 16, 1968. THIS IS THE NATURE OF THE LAND CONTRACT IN THE PRESENT CASE.

HERE, THE LENDING INSTITUTION HOLDING THE SELLER'S MORTGAGE CHARGED THE SELLER A FEE OF 1 PERCENT OF THE REMAINING BALANCE OF THE MORTGAGE LOAN TO CONSENT TO THE SALE ON A LAND CONTRACT. THE SELLER, IN EXERCISING HIS DISCRETION, PASSED THE PAYMENT OF THE FEE OF $684 ON TO THE BUYER, MR. BISHOP.

THE LAND CONTRACT CONSENT FEE CHARGED TO MR. BISHOP IS A FLAT 1 PERCENT OF THE REMAINING BALANCE OF THE MORTGAGE LOAN CHARGED BY THE SELLER'S LENDING INSTITUTION FOR CONSENTING TO THE SALE OF THE RESIDENCE UNDER A LAND CONTRACT. PAYMENT OF THE FEE ALLOWS THE PURCHASER TO MAKE PAYMENTS ON THE SELLER'S MORTGAGE. 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 FOR THE ADMINISTRATIVE COSTS OF PROCESSING A LOAN. IN THIS REGARD, WE HAVE BEEN INFORMALLY ADVISED BY A REPRESENTATIVE OF THE SELLER'S LENDING INSTITUTION THAT A LAND CONTRACT CONSENT FEE IS ESSENTIALLY THE SAME AS A LOAN ASSUMPTION FEE ALTHOUGH THE AMOUNT OF THE FEE MAY BE DIFFERENT.

OUR DECISIONS HAVE LONG HELD THAT A LOAN ASSUMPTION FEE IS NOT A REIMBURSABLE EXPENSE UNDER PARAGRAPH 2-6.2D, FEDERAL TRAVEL REGULATIONS, FPMR 101-7 (SEPTEMBER 1981), BECAUSE IT IS INCIDENT TO THE EXTENSION OF CREDIT AND, THUS, IS REGARDED AS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, AND REGULATION Z, 12 C.F.R. SEC. 226.4(A) (1981). SEE JOHN J. CONNORS, B-197544, JULY 10, 1980; DEAN E. TAYLOR; B-184626, FEBRUARY 12, 1976, AND DECISIONS CITED THEREIN.

SINCE THE LAND CONTRACT CONSENT FEE IS ESSENTIALLY THE SAME AS A LOAN ASSUMPTION FEE, REIMBURSEMENT IS NOT AUTHORIZED. THE RECLAIM VOUCHER MAY NOT BE CERTIFIED FOR PAYMENT.