B-169740, MAY 28, 1971
Highlights
FEES PAID AS "MORTGAGE INSURANCE FEE" AND "REVIEW FEE" ARE NOT REIMBURSABLE. WE CONCLUDED THAT THE $92 FEE FOR MORTGAGE INSURANCE WAS NOT REIMBURSABLE UNDER SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. THAT SINCE THE $20 "REVIEW FEE" WAS CHARGED INCIDENT TO OBTAINING MORTGAGE INSURANCE. THAT FEE LIKEWISE WAS NOT ALLOWABLE. ALSO THERE STATED THAT WE WERE UNABLE TO DETERMINE FROM THE LETTER OF THE LENDER. WHETHER THE LOAN ORIGINATION FEE COVERS ADMINISTRATIVE COSTS INCURRED IN MAKING THE LOAN (WHICH ARE REIMBURSABLE) OR WHETHER SUCH FEE CONSTITUTES "POINTS" WHICH ARE PART OF THE PRICE FOR THE HIRE OF MONEY RESULTING FROM THE INTEREST RATE ON THE LOAN BEING BELOW THE MARKET LEVEL.
B-169740, MAY 28, 1971
CIVILIAN EMPLOYEES - CHANGE OF STATION - REIMBURSEABLE FEES DECISION RELATING TO REIMBURSEMENT OF CERTAIN EXPENDITURES BY RICHARD L. GILBERT, A LABOR DEP'T. EMPLOYEE, IN PURCHASE OF A HOME INCIDENT TO A TRANSFER OF OFFICIAL STATION. FEES PAID AS "MORTGAGE INSURANCE FEE" AND "REVIEW FEE" ARE NOT REIMBURSABLE. BECAUSE ADDITIONAL INFORMATION SHOWS THE REVIEW FEE TO BE ADMINISTRATIVE COSTS, ONE-HALF THE AMOUNT CLAIMED MAY BE REIMBURSED.
TO MR. VLADIMIR OLEYNIK:
YOUR LETTER OF MARCH 16, 1971, REQUESTS RECONSIDERATION OF OUR DECISION OF SEPTEMBER 24, 1970, B-169740, IN WHICH WE CONCLUDED THAT IN THE ABSENCE OF A CLEAR SHOWING OF ENTITLEMENT COLLECTION SHOULD BE MADE OF THE ENTIRE AMOUNT OF $500 (REPRESENTING $92 MORTGAGE INSURANCE FEE, $20 "REVIEW FEE," AND $388 LOAN ORIGINATION FEE) RECEIVED BY MR. RICHARD L. GILBERT, AND EMPLOYEE OF THE DEPARTMENT OF LABOR, AS REIMBURSEMENT FOR CERTAIN EXPENDITURES MADE IN THE PURCHASE OF A HOME INCIDENT TO A CHANGE OF OFFICIAL STATION FROM DUBLIN, GEORGIA, TO DURHAM, NORTH CAROLINA, IN 1967.
IN OUR DECISION OF SEPTEMBER 24, 1970, B-169740, WE CONCLUDED THAT THE $92 FEE FOR MORTGAGE INSURANCE WAS NOT REIMBURSABLE UNDER SECTION 4.2D OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, REVISED OCTOBER 12, 1966, AND THAT SINCE THE $20 "REVIEW FEE" WAS CHARGED INCIDENT TO OBTAINING MORTGAGE INSURANCE, THAT FEE LIKEWISE WAS NOT ALLOWABLE. ALSO THERE STATED THAT WE WERE UNABLE TO DETERMINE FROM THE LETTER OF THE LENDER, THE HOME SAVINGS AND LOAN ASSOCIATION OF DURHAM, NORTH CAROLINA, WHETHER THE LOAN ORIGINATION FEE COVERS ADMINISTRATIVE COSTS INCURRED IN MAKING THE LOAN (WHICH ARE REIMBURSABLE) OR WHETHER SUCH FEE CONSTITUTES "POINTS" WHICH ARE PART OF THE PRICE FOR THE HIRE OF MONEY RESULTING FROM THE INTEREST RATE ON THE LOAN BEING BELOW THE MARKET LEVEL.
IN A LETTER TO MR. GILBERT DATED FEBRUARY 2, 1971, THE HOME SAVINGS AND LOAN ASSOCIATION STATED:
"AS POINTED OUT IN EARLIER CORRESPONDENCE, THE $388.00 CHARGE WAS OUR LOAN SERVICE FEE AT THE TIME YOU PURCHASED YOUR HOME IN DURHAM. SINCE THE DEPARTMENT APPARENTLY JUST WILL NOT ALLOW A 2% FEE, IT MAY BE THAT BY REQUESTING AN ALLOWANCE FOR A 1% SERVICE CHARGE FOR ADMINISTRATIVE COSTS OF HANDLING YOUR LOAN, THIS MATTER MAY FINALLY BE RESOLVED. AS YOU MAY KNOW, THE FHA AND VA PERMIT A 1% SERVICE FEE TO BE CHARGED THE PURCHASER ON THEIR LOANS.
"THE PREMIUM PAID TO AMERICAN MORTGAGE INSURANCE COMPANY, OF $92.00, WAS THE FEE CHARGED FOR THE FIRST YEAR'S INSURANCE ON YOUR LOAN. THIS, AGAIN, WAS SIMILAR IN NATURE TO THE MORTGAGE INSURANCE PREMIUM CHARGED ON FHA LOANS AND IS NOT A PREMIUM FOR MORTGAGE LIFE INSURANCE WHICH MAY HAVE BEEN THE MISUNDERSTANDING ON THIS POINT.
"THE $20.00 REVIEW FEE CHARGED BY AMI IS AN APPRAISAL REVIEW FEE AND MAY BE ALLOWED AS A PROPER CHARGE IF YOUR DEPARTMENT ALLOWS YOUR CLAIM FOR ANY PART OF THIS AMI COST."
IN A LETTER DATED FEBRUARY 22, 1971, MR. GILBERT ALSO SUGGESTS THAT THE $92 "AMI PREMIUM" WAS NOT MORTGAGE LIFE INSURANCE BUT WAS ANALOGOUS TO A MORTGAGE INSURANCE PREMIUM ON FHA LOANS AND THAT THE $20 "SERVICE FEE" WAS A FEE TO AN APPRAISAL FIRM (THAT IS, FOR SERVICES RENDERED). HE STATED WITH RESPECT TO THE SERVICE CHARGE THAT:
"REGARDING THE $388.00 AS 2% 'LENDER'S LOAN ORIGINATION FEE,' 1% WAS SERVICE CHARGE FOR ADMINISTRATIVE COSTS - 1% WAS IN THE NATURE OF 'POINTS;' SO IT WOULD CONCLUDE THAT I PROBABLY DO OWE HALF OF THE $388.00 HERE."
IT SEEMS CLEAR FROM THE ABOVE CORRESPONDENCE THAT THE $92 MORTGAGE INSURANCE FEE IS SIMILAR TO FHA MORTGAGE INSURANCE FEES, THAT IS, MORTGAGE GUARANTEE INSURANCE FEES TO PROTECT THE LENDER AGAINST SOME PORTION OF LOSS IN CASE OF FORECLOSURE OF THE MORTGAGE, AS DISTINGUISHED FROM A MORTGAGE TITLE POLICY, AND THEREFORE IT IS NOT REIMBURSABLE. SEE OUR DECISIONS OF NOVEMBER 13, 1967, AND JUNE 3, 1968, B-162673, COPIES ENCLOSED. AS INDICATED IN OUR DECISION OF SEPTEMBER 24, 1970, B-169740, SINCE THE $20 "REVIEW FEE" WAS CHARGED INCIDENT TO OBTAINING SUCH MORTGAGE INSURANCE, THAT FEE LIKEWISE IS NOT ALLOWABLE.
IN VIEW OF THE ADDITIONAL INFORMATION CONCERNING THE SERVICE CHARGE AS PROVIDED BY THE LOAN ASSOCIATION, AND OF MR. GILBERT'S STATEMENT IN THE MATTER, ONE HALF OF THE AMOUNT, OR $194, MAY NOW BE ALLOWED.
IN SUMMARY, NO PART OF THE $92 MORTGAGE INSURANCE FEE OR OF THE $20 "REVIEW FEE" IS REIMBURSABLE, AND THEREFORE SUCH AMOUNTS SHOULD BE COLLECTED FROM MR. GILBERT. IN ADDITION THERE SHOULD BE COLLECTED ONE HALF OF THE $388 LOAN ORIGINATION FEE.