Matter of: Alan Summers File: B-250432 Date: March 3, 1993

B-250432: Mar 3, 1993

Additional Materials:

Contact:

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

 

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

CIVILIAN PERSONNEL Relocation Residence transaction expenses Loan origination fees Reimbursement Amount determination A transferred employee may not be reimbursed a loan origination fee in excess of 1 percent of the loan amount unless the lender's administrative charges are itemized and are shown by clear and convincing evidence not to include pre-paid interest. Was transferred to Portland. His reimbursement for the loan origination fee was limited to 1 percent ($2. Such reimbursement may not exceed 1 percent of the loan amount unless the lender's administrative expenses are itemized and are shown by clear and convincing evidence not to include prepaid interest. Such documentation is not considered adequate to show what the administrative expenses were.[3] Therefore.

Matter of: Alan Summers File: B-250432 Date: March 3, 1993

CIVILIAN PERSONNEL Relocation Residence transaction expenses Loan origination fees Reimbursement Amount determination A transferred employee may not be reimbursed a loan origination fee in excess of 1 percent of the loan amount unless the lender's administrative charges are itemized and are shown by clear and convincing evidence not to include pre-paid interest, points, or a mortgage discount. 41 C.F.R. Sec. 302-6.2(d)(1)(ii) (1991). Where a lender's letter merely provides a listing of the categories of expenses, and fails to specify the cost attributable to each, it does not meet the requirements of the Federal Travel Regulation and the employee may not be reimbursed in excess of 1 percent of the loan amount.

DECISION The Regional Controller, Western Region, Internal Revenue Service, Department of the Treasury,[1] requests a decision as to whether Mr. Alan Summers may be reimbursed a loan origination fee in excess of 1 percent incident to a permanent change of station in October 1991. We conclude he may not be reimbursed.

Mr. Summers, an employee of the IRS, was transferred to Portland, Oregon, and reported for duty on October 7, 1991. He purchased a residence in the Portland area on March 19, 1992, and paid a 3.5 percent loan origination fee ($9,100). His reimbursement for the loan origination fee was limited to 1 percent ($2,600), because he failed to provide an itemized listing of the administrative charges from his mortgage lender. On reclaim, he provided letters from his mortgage lender listing the types of activities undertaken to process loan applications, but without specifying the cost attributable to each activity. Also, he supplied a letter from the Department of Housing and Urban Development (HUD) which stated that a 3.5 percent loan origination fee would be considered typical for conventional loans in the Portland area.

Section 302-6.2(d)(1)(ii) of the Federal Travel Regulation (FTR),[2] provides, in part, that loan origination fees and similar charges to compensate a lender for administrative expenses incurred in processing a loan application may be reimbursed to an employee. However, such reimbursement may not exceed 1 percent of the loan amount unless the lender's administrative expenses are itemized and are shown by clear and convincing evidence not to include prepaid interest, points, or a mortgage discount.

Where a lender has stated that the loan origination fee did not contain prepaid interest, points or a mortgage discount, or has merely provided a listing of the categories of expenses deemed to be covered by the loan origination fee, such documentation is not considered adequate to show what the administrative expenses were.[3] Therefore, since none of the information provided in this case meets the itemization requirement of the FTR, Mr. Summers may not be reimbursed more than 1 percent of his loan amount as a loan origination fee.

1. Mr. Robert R. Craig.

2. 41 C.F.R. Sec. 302-6.2(d)(1)(ii) (1991).

3. George C. Souders, B-248457, Sept. 29, 1992; Sherre W. Anderson, B-246809, Mar. 31, 1992, and decisions cited.