B-239888, Nov 16, 1990

B-239888: Nov 16, 1990

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000 (1 percent) was previously paid by agency) charged by the lender may not be paid since the listing does not represent clear and convincing evidence as to the identity of the expenses actually incurred by the lender in arriving at the total loan origination fee. Is insufficient to establish the accuracy of that rate. Segers states that the loan origination fee was a flat fee which he had to pay to obtain a loan of $200. Segers has submitted a letter from the lender which lists a percentage breakdown of the loan origination fee as follows: 1. 35% of the origination fee is our cost for obtaining the funds to loan to you 2. 35% is for origination costs ie. processing of the loan. Segers for his mortgage loan are the norm for a loan of that type in the area of the residence.

B-239888, Nov 16, 1990

CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Loan origination fees - Reimbursement - Amount determination DIGEST: Transferred employee purchased a residence at new duty station and has furnished a statement by the lender itemizing, on a percentage basis, the charges covered by the claimed loan origination fee totaling $6,750. Employee states that the itemization does not include prepaid interest, points, or a mortgage discount. The additional $4,750 amount claimed as a loan origination fee ($2,000 (1 percent) was previously paid by agency) charged by the lender may not be paid since the listing does not represent clear and convincing evidence as to the identity of the expenses actually incurred by the lender in arriving at the total loan origination fee. Further, the statement by the lender that the $6,750 loan origination fee represents the rate customarily charged in the locality of the residence, standing alone, is insufficient to establish the accuracy of that rate.

Otis Segers, Jr.:

A decision has been requested as to whether Mr. Otis Segers, Jr., a transferred employee of the Internal Revenue Service (IRS), Department of the Treasury, may be reimbursed an additional $4,750 of a loan origination fee (a 1 percent fee of $2,000 has been reimbursed by IRS) incurred in the purchase of a residence incident to his transfer. /1/

Mr. Segers states that the loan origination fee was a flat fee which he had to pay to obtain a loan of $200,000. Mr. Segers has submitted a letter from the lender which lists a percentage breakdown of the loan origination fee as follows:

1. 35% of the origination fee is our cost for obtaining the funds to loan to you

2. 35% is for origination costs ie. processing of the loan, underwriting and funding

"3. 30% goes to pay the wholesale loan representative and wholesale loan brokers who refer business to us."

Mr. Segers asserts that the itemization does not include prepaid interest, points, or a mortgage discount. He requests reimbursement of an additional $4,750 or, at least, the amounts reflected by items 1 and 3 above.

Mr. Segers has also submitted a letter from a loan services institution stating that the fees charged Mr. Segers for his mortgage loan are the norm for a loan of that type in the area of the residence, based upon the loan amount, Mr. Segers's income, and the type of loan requested. However, a lending institution's statement, standing alone, is insufficient to establish the customary rate in the locality of the residence. /2/ In any event, the customary rate in the locality is irrelevant unless there is clear and convincing evidence of the lender's administrative costs.

In a recent decision, Wayne Pfeffer, B-234288, Feb. 8, 1990, we held that, in order for an employee to be reimbursed for a loan origination fee in excess of 1 percent of the amount of the mortgage loan, he must show by clear and convincing evidence, including an itemization of the lender's administrative charges, that the higher rate does not include prepaid interest, points, or a mortgage discount. /3/

We find that the itemization of the fee submitted by Mr. Segers is subject to substantial doubt as to the identity of the itemized expenses and is not clear and convincing evidence of the lender's administrative costs. The itemization is not a list of actual expenses incurred, but a generalized percentage breakdown of the loan origination fee charged. See Dr. Hoyle Leigh, B-239343, Oct. 11, 1990.

Accordingly, based upon the record before us, Mr. Segers has not met his burden of proof and may not be reimbursed any additional portion of the loan origination fee. The disallowance of the claim by IRS is sustained.

/1/ The request, along with Mr. Seger's original travel voucher and notice of action denying the additional amount of the loan origination fee, has been submitted by Mr. Michael G. Hebert, Regional Fiscal Management Officer, IRS, San Francisco, California.

/2/ Mary C. Saucedo, B-219545, Jan. 15, 1986; Gary A. Clark, B-213740, Feb. 15, 1984.

See section 2-6.2d(1)(b), Federal Travel Regulations, FPMR 101-7 (Supp. 26, Oct. 1, 1987).

/3/ According to 5 U.S.C. Sec. 5532(e), the Office of Personnel Management can authorize exceptions based on employment needs that could not otherwise readily be met.