B-233454, Jan 31, 1990

B-233454: Jan 31, 1990

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" is a loan origination fee. Which is not reimbursable. Baker: The issue is whether an agency may reimburse loan commitment fees charged to two of its employees in connection with their relocations. /1/ When Mr. They each incurred a relocation expense that was identified on the HUD-1A Settlement Statement. No amount was entered by the lending institution on the line containing the pre printed item. Which state that the commitment fee covers the administrative costs to process the loan and is considered to be the same as a loan origination fee. Which state that loan commitment fees and loan origination fees are different. Indicated that it was unable to determine the nature of the fees charged in this case.

B-233454, Jan 31, 1990

CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Finance charges DIGEST: In the absence of sufficient evidence showing that a relocation expense, characterized by the lending institution on the Settlement Certificate as a "Non-Refundable Commitment Fee," is a loan origination fee, the 1 percent fee must be viewed as a finance charge, which is not reimbursable.

Donald E. Howlett and Michael G. Baker:

The issue is whether an agency may reimburse loan commitment fees charged to two of its employees in connection with their relocations. /1/ When Mr. Howlett and Mr. Baker transferred and purchased residences in Wisconsin in 1988, they each incurred a relocation expense that was identified on the HUD-1A Settlement Statement, in typewritten form, as a "Non-Refundable Commitment Fee." No amount was entered by the lending institution on the line containing the pre printed item, "Loan Origination Fee."

The record contains two explanatory letters submitted by the bank, which state that the commitment fee covers the administrative costs to process the loan and is considered to be the same as a loan origination fee. The record also contains two letters from the U.S. Department of Housing and Urban Development (HUD), which state that loan commitment fees and loan origination fees are different. HUD, while noting that Wisconsin banks customarily charge a loan origination fee, indicated that it was unable to determine the nature of the fees charged in this case, i.e., whether they were commitment fees as stated on the settlement forms, or origination fees.

We have generally found that a loan commitment fee is more in the nature of a charge for the hire of money than reimbursement for administrative costs of processing the loan. As such, it is a finance charge which is not reimbursable. See Martin L. Berdan, B-198901, Oct. 3, 1980; Michael Maiello, B-194732, Apr. 11, 1980. Where there is insufficient evidence, as here, to show that a charge is other than a fee to hold a loan commitment at an agreed rate, it is not allowable as a loan origination fee even if the amount is within customary limits. Leslie E. Russell, Jr., B-217189, May 6, 1985. The lender's characterization is not legally conclusive, particularly here, where the lender bypassed the pre-printed "loan origination fee" label and typed in the "commitment fee" charge, but later stated that the two types of charges are the same. See Roger J. Salem, 63 Comp.Gen. 456 (1984).

Accordingly, the loan commitment fees in this case may not be reimbursed.

/1/ The authorized certifying officer for the National Finance Center, Office of Finance and Management, U.S. Department of Agriculture, New Orleans, Louisiana, requested this decision, reference FSD-1 WDM.