B-213740, FEB 15, 1984

B-213740, FEB 15, 1984

DIGEST: TRANSFERRED EMPLOYEE CLAIMED 2.5 PERCENT LOAN ORIGINATION FEE BUT AGENCY LIMITED REIMBURSEMENT TO 2 PERCENT WHERE HUD ADVISED AGENCY THAT 2 PERCENT WAS THE USUAL AND CUSTOMARY RATE FOR LOAN ORIGINATION FEES IN THE AREA OF EMPLOYEE'S NEW OFFICIAL DUTY STATION. THE INFORMATION PROVIDED BY HUD CREATES A REBUTTABLE PRESUMPTION AS TO THE PREVAILING RATE, AND THE EMPLOYEE HAS NOT PROVIDED INFORMATION SUFFICIENT TO REBUT THIS PRESUMPTION.

GARY A. CLARK - LOAN ORIGINATION FEE - CUSTOMARY CHARGE:

ISSUE

THE ISSUE IN THIS DECISION IS WHETHER AN EMPLOYEE MAY BE REIMBURSED FOR A LOAN ORIGINATION FEE WHICH EXCEEDS THE CUSTOMARY RATE FOR THE LOCALITY. WE HOLD THAT THE EMPLOYEE MAY NOT BE REIMBURSED BEYOND THE CUSTOMARY RATE WHERE HE HAS NOT SUFFICIENTLY PROVEN THAT THE PREVAILING RATE IS HIGHER.

BACKGROUND

MR. W. D. MOORMAN, AN AUTHORIZED CERTIFYING OFFICER FOR THE UNITED STATES DEPARTMENT OF AGRICULTURE, HAS REQUESTED OUR DECISION CONCERNING THE CLAIM OF MR. GARY A. CLARK, AN AGRICULTURE EMPLOYEE, FOR REIMBURSEMENT OF A LOAN ORIGINATION FEE.

MR. CLARK, AN EMPLOYEE OF THE OFFICE OF INVESTIGATION AT THE DEPARTMENT OF AGRICULTURE, WAS TRANSFERRED FROM PORTLAND, OREGON, TO SEATTLE, WASHINGTON, EFFECTIVE OCTOBER 31, 1982, AND HE INCURRED THE EXPENSE OF A LOAN ORIGINATION FEE IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT HIS NEW OFFICIAL DUTY STATION. THE LENDING INSTITUTION INVOLVED IN THAT TRANSACTION CHARGED MR. CLARK A 2.5 PERCENT LOAN ORIGINATION FEE IN THE AMOUNT OF $1,698.75. HOWEVER, THE AUDIT UNIT OF THE DEPARTMENT OF AGRICULTURE REIMBURSED MR. CLARK FOR A 2 PERCENT FEE, SUSPENDING 0.5 PERCENT OF THE FEE ($339.75) ON THE BASIS OF ADVICE FROM THE SEATTLE, WASHINGTON, OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) THAT 2 PERCENT WAS THE CUSTOMARY CHARGE FOR A LOAN ORIGINATION FEE IN SEATTLE.

IN SUPPORT OF HIS RECLAIM, MR. CLARK STATED THAT THE HUD SEATTLE OFFICE INFORMED HIM THAT THE PERCENTAGE RATES PROVIDED BY HUD TO FEDERAL AGENCIES ARE GUIDELINES FOR ESTIMATING COSTS AND DO NOT LIMIT THE CHARGES MADE BY LENDERS. IN ADDITION, HE SUBMITTED A LETTER FROM THE LYNNWOOD MORTGAGE CORPORATION, WHICH HANDLED THE CLOSING OF HIS LOAN, ADVISING HIM THAT LOAN FEES IN THE SEATTLE-TACOMA AREA RANGE FROM A MINIMUM OF 2 PERCENT TO A MAXIMUM OF 4 TO 5 PERCENT ON CONVENTIONAL MORTGAGES AND THAT 2.5 PERCENT IS LYNNWOOD'S MINIMUM LOAN FEE ON A CONVENTIONAL LOAN.

IN LIGHT OF MR. CLARK'S ARGUMENTS, THE CERTIFYING OFFICER ASKS WHETHER, ABSENT A SURVEY SHOWING THAT MOST OF THE LENDING INSTITUTIONS IN THE SEATTLE AREA CHARGE 2.5 PERCENT OR MORE FOR LOAN FEES, WOULD THE INFORMATION PROVIDED BY HUD THAT THE 2 PERCENT WAS CUSTOMARY BE CONTROLLING.

ANALYSIS

THE STATUTORY AUTHORITY FOR REIMBURSEMENT OF REAL ESTATE EXPENSES IS FOUND AT 5 U.S.C. SEC. 5724AA)(4)(1982), WHICH PROVIDES THAT REIMBURSEMENT FOR AUTHORIZED REAL ESTATE EXPENSES MAY NOT EXCEED THOSE CUSTOMARILY CHARGED IN THE LOCALITY WHERE THE RESIDENCE IS LOCATED. THIS PROVISION HAS BEEN IMPLEMENTED BY PARAGRAPH 2-6.2D OF THE FEDERAL TRAVEL REGULATIONS (FTR), WHICH WAS REVISED IN OCTOBER 1982, TO SPECIFICALLY AUTHORIZE REIMBURSEMENT FOR LOAN ORIGINATION FEES. SEE ROBERT F. KIGERL B-211304, JULY 12, 1983, 62 COMP.GEN. , WHERE WE HELD THAT THE REVISED REGULATION WAS CONSISTENT WITH THE AUTHORIZING LEGISLATION IN 5 U.S.C. SEC. 5724AA)(4)(1976) AND WOULD BE FOLLOWED BY OUR OFFICE.

AS WE STATED IN PATRICIA A. GRABLIN, B-211310, OCTOBER 4, 1983, REIMBURSEMENT FOR A LOAN ORIGINATION FEE IS LIMITED TO AMOUNTS CUSTOMARILY PAID IN THE LOCALITY OF THE RESIDENCE. SEE FTR PARA. 2 6.2D(1). DETERMINING THE PREVAILING REAL ESTATE COSTS, AGENCIES MAY RECEIVE TECHNICAL ASSISTANCE FROM THE LOCAL OFFICE OF HUD SERVING THE AREA WHERE THE EXPENSES ARE INCURRED. SEE FTR PARAGRAPH 2-6.3C. WE RECOGNIZE THAT THE INFORMATION SUPPLIED BY HUD DOES NOT ESTABLISH INFLEXIBLE RATES OR LIMIT THE CHARGES WHICH MAY BE MADE BY LENDERS. HOWEVER, WE HAVE REPEATEDLY HELD THAT, IN CONNECTION WITH REAL ESTATE BROKERS' COMMISSIONS, THE INFORMATION SUPPLIED BY HUD CREATES A REBUTTABLE PRESUMPTION AS TO THE PREVAILING BROKERAGE COMMISSION RATE IN THE AREA AND IS CONTROLLING IN THE ABSENCE OF EVIDENCE OVERCOMING THAT PRESUMPTION. EDWARD M. JONES, B-208287, APRIL 15, 1983; DAVID R. HOFFMAN, B-182431, JULY 14, 1975.

IN OUR DECISIONS CONCERNING BROKERAGE COMMISSIONS, WE HAVE HELD THAT THIS PRESUMPTION ESTABLISHED BY THE INFORMATION FROM HUD MAY BE OVERCOME BY A SURVEY OF THE REAL ESTATE BROKERS IN A PARTICULAR AREA SHOWING A HIGHER TYPICAL RATE. SEE JONES, AND DECISIONS CITED THEREIN. BUT WHERE AN EMPLOYEE SUPPLIED EVIDENCE THAT REAL ESTATE COMMISSIONS PAID IN A PARTICULAR AREA RANGED OVER 4 PERCENTAGE POINTS, WITHOUT SHOWING THAT ANY RATE OTHER THAN THE ONE SUPPLIED BY HUD WAS DOMINANT, WE HELD HE HAD NOT OVERCOME THE PRESUMPTION. SEE HOFFMAN, CITED ABOVE. SIMILARLY, WE HELD THAT A LETTER FROM A BROKER STATING THEIR POLICY ON COMMISSIONS DID NOT OVERCOME THE PRESUMPTION CREATED BY THE HUD DATA. GEORGE C. SYMONS, B-188527, JANUARY 26, 1978.

WE BELIEVE THE RULES WE HAVE ENUNCIATED WITH REGARD TO BROKERS' COMMISSIONS SHOULD ALSO APPLY TO REIMBURSEMENT OF LOAN ORIGINATION FEES. THUS, HUD'S ADVICE THAT THE USUAL AND CUSTOMARY RATE IN SEATTLE FOR SUCH A FEE IS 2 PERCENT CREATES A REBUTTABLE PRESUMPTION AS TO THE PREVAILING LOAN ORIGINATION FEE. FURTHERMORE, MR. CLARK'S SUBMISSION OF THE LETTER FROM LYNNWOOD MORTGAGE CORPORATION IS INSUFFICIENT TO REBUT THIS PRESUMPTION. SEE SYMONS, CITED ABOVE.

THEREFORE, WE HOLD THAT HUD'S INFORMATION IS CONTROLLING SINCE MR. CLARK HAS FAILED TO SHOW THAT MOST OF THE LENDING INSTITUTIONS IN THE SEATTLE AREA CHARGE 2.5 PERCENT OR MORE FOR LOAN ORIGINATION FEES.