Matter of: George C. Souders - Relocation Expenses File: B-248457 Date: September 29, 1992

B-248457: Sep 29, 1992

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CIVILIAN PERSONNEL Relocation Miscellaneous expenses Reimbursement Eligibility When an employee's household goods are shipped by the government incident to a transfer. Charges by the mover for appliance servicing and grandfather clock packing are charges for services incident to preparing these items for transportation and are payable by the agency as transportation expenses. That the amounts shown thereon are true is not an itemization of the lender's administrative charges as required by the Federal Travel Regulations to support reimbursing an employee more than one percent of the lender's loan origination fee. CIVILIAN PERSONNEL Relocation Residence transaction expenses Finance charges An underwriter's fee and a tax service fee charged by a lender in connection with a mortgage loan are considered to be finance charges rather than appraisal fees or title insurance fees and are therefore not reimbursable residence transaction fees.

Matter of: George C. Souders - Relocation Expenses File: B-248457 Date: September 29, 1992

CIVILIAN PERSONNEL Relocation Miscellaneous expenses Reimbursement Eligibility When an employee's household goods are shipped by the government incident to a transfer, charges by the mover for appliance servicing and grandfather clock packing are charges for services incident to preparing these items for transportation and are payable by the agency as transportation expenses, not expenses covered by the miscellaneous expense allowance. CIVILIAN PERSONNEL Relocation Residence transaction expenses Loan origination fees Reimbursement Amount determination A certification by a settlement agent on a HUD-1 Settlement Statement, which includes a 2-percent charge as a loan origination fee, that the amounts shown thereon are true is not an itemization of the lender's administrative charges as required by the Federal Travel Regulations to support reimbursing an employee more than one percent of the lender's loan origination fee. CIVILIAN PERSONNEL Relocation Residence transaction expenses Finance charges An underwriter's fee and a tax service fee charged by a lender in connection with a mortgage loan are considered to be finance charges rather than appraisal fees or title insurance fees and are therefore not reimbursable residence transaction fees.

DECISION

Mr. George C. Souders, an employee of the Internal Revenue Service (IRS), has appealed our Claims Group's settlement [1] which denied his claim for several expenses in connection with his transfer from Cincinnati, Ohio, to Minneapolis, Minnesota, effective November 6, 1989. For the reasons discussed below we sustain the Claims Group's denial of expenses for lender's underwriting fee, tax service fee and the amount of a loan origination fee in excess of one percent, but we reverse the Claims Group's denial of the mover's packing and service charges for a clock and washer and allow that claim.

CLOCK AND APPLIANCE PACKING AND SERVICE CHARGES

The IRS moved Mr. Souders under the actual expense method whereby the government contracts with the moving company and pays that company directly for its services. [2] The mover the IRS contracted with hired a contractor to pack Mr. Souders' grandfather clock and service his washing machine for the move. The mover billed the contractor's charges for packing and servicing to the IRS, but the IRS and our Claims Group concluded that the charges were Mr. Souders' responsibility.

The reason Mr. Souders was not credited for the packing and service charges is that the agency considered these to be charges covered by the miscellaneous expense allowance which Mr. Souders had already been paid. The costs of disconnecting and connecting appliances and adjusting and leveling grandfathers clocks after they have been unpacked are not considered transportation expenses but are considered reimbursable under the miscellaneous expense allowance. See Federal Travel Regulations (FTR), 41 C.F.R. Sec. 302-3.1(b) (1990), and John F. McCauley, B-190444, May 30, 1978. However, the expenses Mr. Souders claims do not appear to be these types of expenses, but instead appear to be the servicing and packing necessary for the transportation of these items. As such they are payable by the agency as packing and necessary accessorial expenses of the transportation and not under the miscellaneous expense allowance. John F. McCauley, supra, and FTR Sec. 308-8.3(b)(3). Thus, the part of the Claims Group's settlement denying Mr. Souders credit for the contractor's packing and service charges is reversed, and credit for those charges is allowed.

LOAN ORIGINATION FEE

Mr. Souders states that when he was seeking a lender to finance the purchase of his house in Minneapolis, he encountered loan origination fees from different lenders ranging between one and a half and two and a half percent. He therefore believes the loan origination fee of two percent he paid was reasonable. He also states that brokers have informed him that loan origination fees range from zero to three percent depending on the market conditions.

Under 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. None of the information Mr. Souders has provided, including the certification on the standard HUD-1 Settlement Statement by a real estate broker that the amounts shown on the statement are true, meets the "itemization" requirement of the FTR. In cases where lenders have provided separate letters merely stating that their loan origination fees did not contain prepaid interest, points, or a mortgage discount, or merely providing a listing of the categories of costs considered to be covered by the loan origination fees, this documentation was not considered to be an adequate itemization to show by clear and convincing evidence what the lender's administrative charges were. See Sherree W. Anderson, B-246809, Mar. 31, 1992, and Wayne Pfeffer, B-234288, Feb. 8, 1990. Thus, Mr. Souders may not be reimbursed for more than one percent of his loan amount for his loan origination fee.

UNDERWRITER'S FEE AND TAX SERVICE FEE

Mr. Souders is aware that any fees that are properly classified as part of the lender's finance charge cannot be reimbursed because of the prohibition in the FTR Sec. 302-6.2(d)(2)(v), against reimbursement of any "fee, cost, charge, or expense determined to be part of the finance charge" under the Truth in Lending Act and Regulation Z of the Federal Reserve (12 C.F.R Part 226), unless specifically authorized by paragraph (d)(1) of this section. He believes, however, that the underwriter's fee and the tax service fee are by their nature appraisal fees or title insurance fees, which may be reimbursable under FTR Sec. 302-6.2(b) and (c).

We have held, however, that underwriter's and tax service fees are part of the lender's finance charge and are not analogous to other fees specifically excludable from the finance charge. See Kenneth R. Pedde, B-223797, Apr. 20, 1987, and cases cited therein. [3] Thus, Mr. Souders may not be reimbursed for these fees.

Date: To: Director, Claims Group/GGD - Sharon S. Green From: General Counsel - James F. Hinchman

Subject: George C. Souders - Relocation Expenses-- B-249457, Z-2867471

Returned is Claims File No. Z-2867471 and a copy of decision B-248457 of today's date, affirming in part and reversing in part the Claims Group's action on the subject claim.

1. Z-2867471, Feb. 12, 1992.

2. See 41 C.F.R. Sec. 302-8.3(b).

3. As is noted in the Pedde case, the Truth in Lending Act defines finance charges broadly as all charges "imposed directly or indirectly by the creditor as an incident to the extension of credit" (15 U.S.C. Sec. 1605(a) (1988)), and neither the act nor Regulation Z specifically exempts underwriter's and tax service fees from inclusion as finance charges.