B-246809, Mar 31, 1992

B-246809: Mar 31, 1992

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An employee can be reimbursed for a loan origination fee in excess of one percent of the loan amount only if the lender's administrative charges are itemized and shown by clear and convincing evidence not to include prepaid interest. A letter from the lender stating that its two percent loan origination fee is a standard administrative fee charged by the lenders in the area to process the loan and does not include any points. Or discounts is not an itemization of the lender's administrative charges. Anderson: The question in this case is whether Ms. An employee can be reimbursed for a loan origination fee in excess of one percent of the loan amount only if the lender's administrative charges are itemized and are shown by clear and convincing evidence not to include prepaid interest.

B-246809, Mar 31, 1992

DIGEST: Under the Federal Travel Regulations, an employee can be reimbursed for a loan origination fee in excess of one percent of the loan amount only if the lender's administrative charges are itemized and shown by clear and convincing evidence not to include prepaid interest, points, or a mortgage discount. A letter from the lender stating that its two percent loan origination fee is a standard administrative fee charged by the lenders in the area to process the loan and does not include any points, prepaid interest, or discounts is not an itemization of the lender's administrative charges. Thus, the employee may not be reimbursed in excess of one percent of the loan amount.

Sherree W. Anderson:

The question in this case is whether Ms. Sherree W. Anderson, an employee of the Internal Revenue Service (IRS), may be reimbursed a total of two percent of the loan amount for a loan origination fee incurred in the purchase of a residence incident to her transfer. /1/ She has been reimbursed an initial one percent, and her reimbursement may not exceed that amount because there has been no itemization of the lender's administrative charges to support her claim.

Under the Federal Travel Regulations (FTR), 41 C.F.R. Sec. 302 6.2(d)(1)(ii), an employee can be reimbursed for a loan origination fee in excess of one percent of the loan amount only if the lender's administrative charges are itemized and are shown by clear and convincing evidence not to include prepaid interest, points, or a mortgage discount. In this case the lender furnished a letter stating that its two percent loan origination fee was a standard administrative fee charged to process the loan and that it did not include any prepaid interest, points or discounts. However, the lender did not otherwise "itemize" its lump-sum two percent figure to show any specific administrative charges. decision Anthony D. Ferris, B-237507, Mar. 30, 1990, we held that a nearly identical letter from a lender explaining a loan origination fee in the same manner did not furnish an itemization of the lender's administrative charges and thus could not support more than a one percent reimbursement of the loan amount. For the same reason Ms. Anderson may not be reimbursed the additional one percent of the loan amount she claims for the loan origination fee.

The IRS' Regional Fiscal Management Officer also seeks further explanation of the "itemization" requirement and inquires whether a list of each administrative cost/expense for originating the loan from a lender would be sufficient. He states that most lenders do not account for administrative costs of each specific loan.

We note that the general limitation of one percent was established with the view that, except in unusual cases, it will provide a fair and sufficient reimbursement for legitimate administrative costs. Wayne Pfeffer, B-234288, Feb. 8, 1990. For those cases where more than one percent is claimed, the itemization must be provided in furtherance of the requirement to show by clear and convincing evidence that the amount charged does not include prepaid interest, points, or a mortgage discount. /2/ A mere listing of the categories of costs considered to be covered by the loan origination fee has not been considered to be clear and convincing evidence of the lender's administrative charges for a particular loan. Otis Segers, Jr., B-239888, Nov. 16, 1990; Dr. Hoyle Leigh, B-239343, Oct. 11, 1990. Beyond that, however, it is difficult to say exactly what would satisfy the requirement, and each case would have to be decided based on the evidence presented.

/1/ The question was submitted by the Regional Fiscal Management Officer, Western Region, Internal Revenue Service.

/2/ The FTR also requires clear and convincing evidence that a loan origination fee of more than one percent of the loan amount is customarily charged in the locality of the residence. Although the Regional Fiscal Management Officer has questions about that requirement, we need not be concerned with them in this case because the requirement is irrelevant unless clear and convincing evidence of the lender's administrative charges is presented. Otis Segers, Jr., supra; Dr. Hoyle Leigh, supra.