B-214101, MAY 7, 1984, 63 COMP.GEN. 355

B-214101: May 7, 1984

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

NOT ITEMS WHICH ARE CONSIDERED TO BE FINANCE CHARGES. LOAN ASSUMPTION FEE MAY BE REIMBURSED WHERE IT IS ASSESSED INSTEAD OF A LOAN ORIGINATION FEE. SINCE THE FEDERAL TRAVEL REGULATIONS NOW PERMIT REIMBURSEMENT OF LOAN ORIGINATION FEES AND OTHER FEES OR CHARGES THAT ARE SIMILAR IN NATURE. WAS SIMILAR IN NATURE TO AND WAS CHARGED INSTEAD OF A LOAN ORIGINATION FEE. BACKGROUND THIS DECISION IS IN RESPONSE TO A REQUEST FROM KATHRYN E. AITKEN WAS TRANSFERRED FROM PORT MUGU. HE WAS CHARGED AN ASSUMPTION FEE OR A LOAN TRANSFER FEE OF $268.21 WHICH REPRESENTS ONE- HALF OF ONE PERCENT OF THE BALANCE OF THE LOAN. THE AGENCY DENIED THE CLAIM FOR THE LOAN ASSUMPTION FEE ON THE BASIS THAT IT IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT.

B-214101, MAY 7, 1984, 63 COMP.GEN. 355

OFFICERS AND EMPLOYEES - TRANSFERS - REAL ESTATE EXPENSES - LOAN ASSUMPTION FEE EMPLOYEE TRANSFERRED TO NEW DUTY STATION AND, UPON PURCHASING A RESIDENCE, HE INCURRED A LOAN ASSUMPTION FEE. FEDERAL TRAVEL REGULATIONS, AS AMENDED IN OCTOBER 1982, PERMIT REIMBURSEMENT OF LOAN ORIGINATION FEE AND SIMILAR FEES AND CHARGES, BUT NOT ITEMS WHICH ARE CONSIDERED TO BE FINANCE CHARGES. LOAN ASSUMPTION FEE MAY BE REIMBURSED WHERE IT IS ASSESSED INSTEAD OF A LOAN ORIGINATION FEE, AND REFLECTS CHARGES FOR SERVICES SIMILAR TO THOSE COVERED BY A LOAN ORIGINATION FEE.

MATTER OF: EDWARD W. AITKEN - LOAN ASSUMPTION FEE, MAY 7, 1984:

ISSUE

THE ISSUE IN THIS DECISION INVOLVES THE CLAIM OF AN EMPLOYEE FOR REIMBURSEMENT OF A LOAN ASSUMPTION FEE WHICH HE PAID IN CONNECTION WITH A TRANSFER TO A NEW DUTY STATION. SINCE THE FEDERAL TRAVEL REGULATIONS NOW PERMIT REIMBURSEMENT OF LOAN ORIGINATION FEES AND OTHER FEES OR CHARGES THAT ARE SIMILAR IN NATURE, WE HOLD THAT THE EMPLOYEE MAY BE REIMBURSED FOR A LOAN ASSUMPTION FEE WHICH, IN THIS CASE, WAS SIMILAR IN NATURE TO AND WAS CHARGED INSTEAD OF A LOAN ORIGINATION FEE.

BACKGROUND

THIS DECISION IS IN RESPONSE TO A REQUEST FROM KATHRYN E. MITCHELL, A CERTIFYING OFFICER WITH THE BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR, CONCERNING THE CLAIM OF MR. EDWARD T. AITKEN, AN INTERIOR EMPLOYEE.

MR. AITKEN WAS TRANSFERRED FROM PORT MUGU, CALIFORNIA, TO LOVELAND, COLORADO, EFFECTIVE MAY 6, 1983. IN CONNECTION WITH THIS TRANSFER HE PURCHASED A RESIDENCE IN LOVELAND ON AUGUST 18, 1983. MR. AITKEN ASSUMED THE EXISTING MORTGAGE OF $53,642.05 ON THE RESIDENCE, AND HE WAS CHARGED AN ASSUMPTION FEE OR A LOAN TRANSFER FEE OF $268.21 WHICH REPRESENTS ONE- HALF OF ONE PERCENT OF THE BALANCE OF THE LOAN.

THE AGENCY DENIED THE CLAIM FOR THE LOAN ASSUMPTION FEE ON THE BASIS THAT IT IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, MAY 29, 1968, 28 STAT. 146, AS AMENDED, 15 U.S.C. 1601-1667 (1982), AS IMPLEMENTED BY REGULATION Z, 12 C.F.R. 226.4 (1983), AND THEREFORE IS NOT REIMBURSABLE UNDER THE APPLICABLE REGULATIONS GOVERNING RELOCATION EXPENSES. MR. AITKEN CLAIMS THAT THIS FEE IS THE SAME AS A LOAN ORIGINATION FEE WHICH IS NOW REIMBURSABLE UNDER THE APPLICABLE RELOCATION REGULATIONS. IN SUPPORT OF HIS POSITION, HE HAS SUBMITTED A LETTER FROM THE FIRST NATIONAL BANK IN LOVELAND STATING THAT AN ASSUMPTION/LOAN TRANSFER FEE IS THE SAME AS AN ORIGINATION FEE.

OPINION

UNDER THE PROVISIONS OF 5 U.S.C. 5724AA)(4) (1982) AND THE IMPLEMENTING REGULATIONS, THE FEDERAL TRAVEL REGULATIONS, FPMR 101-7 (SEPTEMBER 1981) (FTR), AN EMPLOYEE MAY BE REIMBURSED FOR CERTAIN REAL ESTATE EXPENSES INCURRED WHEN HE TRANSFERS TO A NEW DUTY STATION. PARAGRAPH 2-6.2D OF THE FTR LISTS VARIOUS MISCELLANEOUS EXPENSES RELATED TO THE REAL ESTATE TRANSACTIONS WHICH MAY BE REIMBURSED.

OUR DECISIONS HAVE PREVIOUSLY HELD THAT A LOAN ORIGINATION FEE CONSTITUTED A FINANCE CHARGE UNDER REGULATION Z AND COULD NOT BE REIMBURSED UNDER PARA. 2-6.2D UNLESS THE FEE WAS BROKEN INTO SPECIFIC CHARGES WHICH WERE EXCLUDED FROM DEFINITION OF A FINANCE CHARGE. STANLEY KEER, B-203630, MARCH 9, 1982. THE SAME PRINCIPLE APPLIED TO LOAN ASSUMPTION FEES. DEAN E. TAYLOR, B-184626, FEBRUARY 12, 1976.

HOWEVER, IN ROBERT E. KIGERL, B-211304, JULY 12, 1983, 62 COMP.GEN. 534, WE NOTED THAT THE GENERAL SERVICES ADMINISTRATION (GSA) HAD AMENDED THE FEDERAL TRAVEL REGULATIONS, THROUGH GSA BULLETIN FPMR A-40, SUPPLEMENT 4, EFFECTIVE OCTOBER 1, 1982, TO SPECIFICALLY AUTHORIZE REIMBURSEMENT FOR LOAN ORIGINATION FEES AS FOLLOWS: THE EXPENSES LISTED BELOW ARE REIMBURSABLE IN CONNECTION WITH THE SALE AND/OR PURCHASE OF A RESIDENCE, PROVIDED THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE IN THE LOCALITY OF THE OLD OFFICIAL STATION OR BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY PAID IN THE LOCALITY OF THE RESIDENCE.

(A) FHA OR VA FEE FOR THE LOAN APPLICATION; (B) LOAN ORIGINATION FEE; (C) COST OF PREPARING CREDIT REPORTS; (D) MORTGAGE AND TRANSFER TAXES; (E) STATE REVENUE STAMPS; (F) OTHER FEES AND CHARGES SIMILAR IN NATURE TO THOSE LISTED ABOVE, UNLESS SPECIFICALLY PROHIBITED IN (2), BELOW;

(2) NONREIMBURSABLE ITEMS. EXCEPT AS OTHERWISE PROVIDED IN (1), ABOVE, THE FOLLOWING ITEMS OF EXPENSE ARE NOT REIMBURSABLE.

(E) NO FEE, COST CHARGE, OR EXPENSE DETERMINED TO BE PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUB. L. 90-321, AND REGULATION Z ISSUED IN ACCORDANCE WITH PUB. L. 90-321 BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, UNLESS SPECIFICALLY AUTHORIZED IN (1), ABOVE; * * * .

WE HELD IN KIGERL THAT ALTHOUGH A LOAN ORIGINATION FEE MAY CONSTITUTE A FINANCE CHARGE WITHIN THE MEANING OF REGULATION Z, GSA HAS NOW AUTHORIZED REIMBURSEMENT UNDER THE PROVISIONS OF FTR PARA. 2-6.2D, QUOTED ABOVE. CONCLUDED THAT THIS AMENDMENT WAS CONSISTENT WITH THE AUTHORIZING LEGISLATION AND WOULD BE FOLLOWED BY THIS OFFICE. SEE ALSO PATRICIA A. GRABLIN, B-211310, OCTOBER 4, 1983.

THE QUESTION PRESENTED IN THIS CASE IS A CLAIM FOR REIMBURSEMENT OF A LOAN ASSUMPTION FEE WHICH IS NOT SPECIFICALLY LISTED AS A MISCELLANEOUS EXPENSE IN THE CURRENT VERSION OF FTR PARA. 2-6.2D(1) AND WHICH HAS BEEN PREVIOUSLY TREATED AS A FINANCE CHARGE, REIMBURSEMENT OF WHICH HAS BEEN PRECLUDED BY EARLIER VERSIONS OF FTR PARA. 2-6.2D. TAYLOR, CITED ABOVE. WE NOTE THAT FTR PARA. 2-6.2D(1)(F) ALLOWS REIMBURSEMENT OF "OTHER FEES AND CHARGES SIMILAR IN NATURE" TO THOSE LISTED IN PARA. 2-6.2D(1)(A-E) UNLESS SPECIFICALLY PROHIBITED IN PARA. 2-6.2D(2). THUS MR. AITKEN CLAIMS REIMBURSEMENT FOR A FEE WHICH WE HAVE CHARACTERIZED AS A FINANCE CHARGE UNDER REGULATION Z BUT WHICH IS SIMILAR IN NATURE TO A LOAN ORIGINATION FEE THAT MAY BE REIMBURSED.

ALTHOUGH A LOAN ASSUMPTION FEE MAY BE CHARACTERIZED AS A FINANCE CHARGE, WE CONCLUDE THAT THIS LOAN ASSUMPTION FEE MAY BE REIMBURSED UNDER FTR PARA. 2-6.2D(1)(F) AS A FEE OR CHARGE SIMILAR IN NATURE TO A LOAN FEE. BELIEVE THE INTENT OF PARA. 2-6.2D(1)(F) IS TO PERMIT REIMBURSEMENT OF FEES WHICH ARE SIMILAR TO THOSE LISTED IN PARA. 2 6.2D(1)(A-E) AND WHICH ARE CHARGED INSTEAD OF ONE OF THE ENUMERATED FEES.

BY WAY OF CONTRAST, WE CONSIDERED A CLAIM FOR REIMBURSEMENT OF A VETERANS ADMINISTRATION (VA) FUNDING FEE WHICH IS A LOAN FEE OF ONE HALF OF ONE PERCENT AND CONSTITUTES A USER CHARGE WHICH IS DEPOSITED INTO THE U.S. TREASURY AS A MISCELLANEOUS RECEIPT. WE HELD THAT THE VA FUNDING FEE IS A FINANCE CHARGE UNDER REGULATION Z AND IS NOT REIMBURSABLE UNDER THE AMENDED VERSION OF FTR PARA. 2-6.2D, QUOTED ABOVE. B-209945, JUNE 9, 1983, 62 COMP.GEN. 456. WHAT IS CRUCIAL FOR OUR PURPOSES IS THAT THE VA FUNDING FEE CONSIDERED IN B-209945 IS CHARGED IN ADDITION TO A LOAN ORIGINATION FEE WHICH COMPENSATES THE LENDER FOR EXPENSES INCURRED IN ORIGINATING THE LOAN, PREPARING DOCUMENTS, AND RELATED WORK. IN THE CASE BEFORE US, THE LOAN ASSUMPTION FEE WAS CHARGED INSTEAD OF A LOAN ORIGINATION FEE, AND IT APPEARS TO REPRESENT SIMILAR EXPENSES INCURRED BY THE LENDER.

IT SHOULD ALSO BE NOTED THAT, UNDER AN EARLIER REGULATION, BUREAU OF THE BUDGET CIRCULAR NO. A-56 (OCTOBER 1966), WHICH WAS IN FORCE UNTIL 1969, LOAN ORIGINATION FEES WERE REIMBURSABLE. IN B-164906, AUGUST 12, 1968, WE CONSIDERED WHETHER A LOAN ASSUMPTION FEE WAS SUFFICIENTLY SIMILAR TO A LOAN ORIGINATION FEE TO BE REIMBURSABLE, AND WE HELD THAT IT WAS.

WE BELIEVE IT WOULD BE ANOMALOUS TO REIMBURSE ONE EMPLOYEE FOR A LOAN ORIGINATION FEE WHILE DENYING ANOTHER EMPLOYEE REIMBURSEMENT FOR SIMILAR CHARGES AND FEES PAID TO THE LENDER MERELY BECAUSE THE SECOND EMPLOYEE ASSUMED AN EXISTING MORTGAGE ON A RESIDENCE RATHER THAN OBTAINING A NEW MORTGAGE ON THE PROPERTY.

ACCORDINGLY, WE HOLD THAT WHERE A LOAN ASSUMPTION FEE INVOLVES SIMILAR CHARGES AND FEES TO THOSE COVERED BY A LOAN ORIGINATION FEE AND WHERE THE LOAN ASSUMPTION FEE IS ASSESSED INSTEAD OF A LOAN ORIGINATION FEE, IT MAY BE REIMBURSED UNDER FTR PARA. 2-6.2D(1) AS A MISCELLANEOUS EXPENSE. THEREFORE, MR. AITKEN'S CLAIM MAY BE PAID CONSISTENT WITH THE LIMITATIONS CONTAINED IN THE FTR.