B-171056, NOV. 27, 1970

B-171056, NOV. 27, 1970

TRANSFERS - REAL ESTATE EXPENSES DECISION CONCERNING PROPRIETY OF REIMBURSING EMPLOYEE TRANSFERRED FROM NEW YORK CITY TO SAN DIEGO, CALIF., FOR EXPENSES INCIDENT TO PURCHASE OF RESIDENCE. TRANSFERRED EMPLOYEE WHO PAID TAX SERVICE CHARGE, CREDIT REPORT CHARGE AND LOAN FEE WHICH IS A COMPOSITE AMOUNT CONSISTING OF PROCESSING AND APPRAISAL FEE AND A LOAN ORIGINATION COMMISSION, MAY NOT BE REIMBURSED FOR THE LOAN ORIGINATION FEE OR THE TAX SERVICE CHARGE TO THE ESCROW HOLDER, SINCE THE LATTER IS A FINANCE CHARGE, BUT MAY BE REIMBURSED FOR THE CREDIT REPORT CHARGE. WHILE THE APPRAISAL FEE WOULD BE FOR ALLOWANCE, THE RECORD DOES NOT INDICATE THE APPORTIONMENT BETWEEN THE PROCESSING AND APPRAISAL FEE.

TO MR. L. V. AUTREY:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 14, 1970, REQUESTING OUR DECISION AS TO THE PROPRIETY OF CERTIFYING A VOUCHER COVERING PAYMENT OF $1,118.20 TO MR. GEORGE R. HALPIN, JR., UNDER THE FOLLOWING CIRCUMSTANCES.

THE RECORD SHOWS THAT MR. HALPIN WAS TRANSFERRED FOR PERMANENT DUTY FROM NEW YORK, NEW YORK, TO SAN DIEGO, CALIFORNIA, ON SEPTEMBER 16, 1969. SUBSEQUENT TO THAT DATE HE PURCHASED A RESIDENCE IN THE SAN DIEGO AREA INCURRING CERTAIN EXPENSES. AN ESCROW STATEMENT PREPARED BY THE GUARDIAN ESCROW COMPANY SHOWS THAT MR. HALPIN'S ACCOUNT WAS DEBITED WITH $15 AS A TAX SERVICE CHARGE, $30.20 AS A CREDIT REPORT CHARGE AND $1,073 AS A LOAN FEE, FOR THE TOTAL OF $1,118.20 HE SEEKS TO BE REIMBURSED. THE BORROWER'S INSTRUCTION OF THE HOME SAVINGS AND LOAN ASSOCIATION OF LOS ANGELES, SAN DIEGO BRANCH, DISCLOSES THAT THE LOAN FEE DEBIT IS A COMPOSITE AMOUNT CONSISTING OF A PROCESSING AND APPRAISAL FEE AND A LOAN ORIGINATION COMMISSION OF $281.32.

SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. A-56, AS REVISED BY TRANSMITTAL MEMORANDUM NO. 5, DATED JUNE 26, 1969, PRECLUDES REIMBURSEMENT OF A LOAN ORIGINATION FEE. ACCORDINGLY, THE AMOUNT OF $281.32 IS REGARDED AS A PART OF A LOAN ORIGINATION FEE AND MAY NOT BE CERTIFIED FOR PAYMENT.

WE HAVE PREVIOUSLY HELD THAT A TAX SERVICE CHARGE PAID BY A PURCHASING EMPLOYEE TO AN ESCROW HOLDER IS A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-231, AND THE IMPLEMENTING REGULATIONS AND, THEREFORE, IS NOT REIMBURSABLE. SEE 49 COMP. GEN. , B-168674, FEBRUARY 10, 1970. ACCORDINGLY, THE $15 TAX SERVICE CHARGE MAY NOT BE ALLOWED.

SECTION 106 OF THE TRUTH IN LENDING ACT PROVIDES, AMONG OTHER THINGS, AS FOLLOWS:

"(E) THE FOLLOWING ITEMS, WHEN CHARGED IN CONNECTION WITH ANY EXTENSION OF CREDIT SECURED BY AN INTEREST IN REAL PROPERTY, SHALL NOT BE INCLUDED IN THE COMPUTATION OF THE FINANCE CHARGE WITH RESPECT TO THAT TRANSACTION:

"(5) APPRAISAL FEES.

"(6) CREDIT REPORTS."

THE IMPLEMENTING REGULATION BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, REGULATION Z (12 CFR, PART 226) IS TO THE SAME EFFECT. FIND, THEREFORE, THAT THE AMOUNT OF $30.20 CHARGED FOR THE CREDIT REPORT IS FOR ALLOWANCE.

THE AMOUNT OF $791.68 (LOAN FEE OF $1,073 LESS LOAN ORIGINATION COMMISSION OF $281.32) INCLUDES PROCESSING AND APPRAISAL FEES. WE ARE UNABLE TO DETERMINE FROM THE RECORD BEFORE US THE APPORTIONMENT OF THIS AMOUNT BETWEEN PROCESSING AND APPRAISAL FEES. THE APPRAISAL FEE WOULD BE FOR ALLOWANCE. HOWEVER, THE PROCESSING FEE IS LIKEWISE TO BE REGARDED AS A PART OF A LOAN ORIGINATION FEE AND FOR DISALLOWANCE UNDER SECTION 4.2D OF CIRCULAR NO. A-56, AS WELL AS UNDER THE TRUTH IN LENDING ACT AND IMPLEMENTING REGULATIONS.

THE VOUCHER IS RETURNED HEREWITH FOR HANDLING IN ACCORDANCE WITH THE ABOVE.