B-170571, NOV 16, 1971

B-170571, NOV 16, 1971

CIVILIAN PERSONNEL - MORTGAGE INSURANCE - REIMBURSEMENT DECISION AFFIRMING ACTION OF CLAIMS DIVISION CONCERNING COLLECTION OF AMOUNTS PAID MESSRS. ROBERT A. EXON AND VERDAINE L. HOLSTEEN REPRESENTING MORTGAGE INSURANCE EXPENSE INCIDENT TO PURCHASE OF RESPECTIVE RESIDENCES UPON TRANSFER TO NEW DUTY STATIONS. PAYMENT WAS MADE WRONGFULLY AS REIMBURSEMENT OF SUCH EXPENSE IS SPECIFICALLY DENIED BY SECTION 4.2D OF OMB CIR. NO. A-56. THE FACT THAT EXPENSES MUST BE PAID IN THE LOCALITY INVOLVED DOES NOT OVERRIDE THE EXPRESS PROHIBITION. AS THE AMOUNT WAS NOT PAY (SALARY), THE COMP. GEN. MAY NOT WAIVE COLLECTION.

TO MR. ROGER P. KAPLAN:

WE REFER TO YOUR LETTER OF OCTOBER 6, 1971, WITH ENCLOSURES, ON BEHALF OF MESSRS. ROBERT A. EXON AND VERDAINE L. HOLSTEEN, APPEALING FROM THE ACTIONS OF OUR CLAIMS DIVISION DATED MAY 19, 1970, IN SUSTAINING THE COLLECTION OF ALLEGED OVERPAYMENTS MADE TO MESSRS. EXON AND HOLSTEEN IN CONNECTION WITH REIMBURSEMENT OF CLOSING COSTS INCURRED IN THE PURCHASE OF NEW RESIDENCES AT A NEW PERMANENT DUTY STATION.

WE PREVIOUSLY REVIEWED THE CLAIM OF MR. EXON, PURSUANT TO HIS REQUEST OF JUNE 17, 1970, AND A COPY OF OUR DECISION RELATIVE THERETO, B 170571, NOVEMBER 9, 1970, IS ENCLOSED. AS A RESULT OF YOUR INQUIRY, WE ARE RECONSIDERING THAT DECISION ALONG WITH OUR CLAIMS DIVISION SETTLEMENT REGARDING MR. HOLSTEEN.

THE CIRCUMSTANCES WHICH GAVE RISE TO THE CLAIMS AGAINST MESSRS. EXON AND HOLSTEEN ARE IDENTICAL IN BOTH CASES. THE RECORD INDICATES THAT IN 1968, PURSUANT TO A CHANGE OF OFFICIAL STATION, MESSRS. EXON AND HOLSTEEN WERE TRANSFERRED TO THE TOPEKA VETERANS ADMINISTRATION HOSPITAL IN TOPEKA, KANSAS. SUBSEQUENTLY, BOTH EMPLOYEES BOUGHT HOMES AND WERE REIMBURSED FOR CERTAIN ROUTINE AND USUAL COSTS INCIDENT TO THE PURCHASES. INCLUDED IN THE AMOUNTS REIMBURSED WAS AN ITEM SHOWN ON THE LOAN SETTLEMENT STATEMENT (YOUR ENCLOSURE #3 RE: MR. EXON) AS "MGIC INSURING PREMIUM, TO INSURE MORTGAGEE AGAINST DEFAULT ON PART OF MORTGAGOR." THAT ITEM, FOR MORTGAGE GUARANTEE INSURANCE, WAS IN THE AMOUNT OF $476 IN THE CASE OF MR. EXON AND $532 IN THE CASE OF MR. HOLSTEEN. BOTH SUMS WERE LATER HELD NOT PROPER FOR REIMBURSEMENT AND BILLS FOR COLLECTION WERE ISSUED FOR REPAYMENT.

YOU CONTEND THAT THE MONEY PAID BY MESSRS. HOLSTEEN AND EXON FOR THE MORTGAGE GUARANTEE INSURANCE IS REIMBURSABLE UNDER THE GOVERNMENT'S REGULATIONS FOR PURCHASES OF RESIDENCES INCIDENTAL TO A PERMANENT CHANGE OF STATION. YOU STATE THAT THE COST OF MORTGAGE GUARANTEE INSURANCE IS CUSTOMARY IN THE TOPEKA, KANSAS, AREA WHERE THE PURCHASER ONLY PUTS DOWN 10 PERCENT OF THE PURCHASE PRICE AND YOU DOUBT THAT EITHER MR. EXON OR MR. HOLSTEEN WOULD HAVE BEEN ABLE TO PURCHASE THEIR RESPECTIVE RESIDENCES WITHOUT PAYING THE INSURANCE PREMIUM REQUIRED AS PROTECTION FOR THE LENDER. YOU CONTEND THAT WHEN THE COSTS ARE SOLELY FOR THE PROTECTION OF THE LENDER AND CUSTOMARY IN THE LOCALITY, THE GOVERNMENT SHOULD PAY THOSE EXPENSES.

SECTION 23(4) OF THE ADMINISTRATIVE EXPENSES ACT OF 1946, AS ADDED BY SECTION 2 OF PUBLIC LAW 89-516, 80 STAT. 323, NOW 5 U.S.C. 5724AA)(4), PROVIDES FOR THE REIMBURSEMENT OF EXPENSES INCURRED BY A TRANSFERRED EMPLOYEE INCIDENT TO THE PURCHASE OF A HOUSE AT A NEW OFFICIAL STATION. THE IMPLEMENTING REGULATIONS TO THAT STATUTE ARE FOUND IN OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, REVISED AUGUST 17, 1971. SECTION 4 OF THAT CIRCULAR PERTAINS TO THOSE EXPENSES THAT ARE REIMBURSABLE AND NONREIMBURSABLE IN CONNECTION WITH REAL ESTATE TRANSACTIONS. YOU MAKE REFERENCE TO SECTION 4 IN QUOTING AN EXCERPT FROM OUR DECISION OF JUNE 27, 1967, B-161459, PUBLISHED AT 46 COMP. GEN. 884. THE LANGUAGE IN THAT DECISION WHICH YOU BELIEVE SUPPORTS YOUR POSITION IS AS FOLLOWS:

" ***SECTION 4.2D OF CIRCULAR NO. A-56 PROVIDES IN PERTINENT PART:

' *** THE COST OF A MORTGAGE TITLE POLICY ON THE DWELLING PURCHASED BY THE EMPLOYEE IS ALSO REIMBURSABLE. COSTS OF OTHER TYPES OF INSURANCE, INCLUDING "RECORD TITLE" POLICIES, OWNERS' TITLE POLICIES, MORTGAGE INSURANCE, AND INSURANCE AGAINST DAMAGE OR LOSS OF PROPERTY ARE NOT REIMBURSABLE. *** '

"ALTHOUGH THAT SECTION SPECIFICALLY PROHIBITS REIMBURSEMENT OF THE COST OF AN OWNER'S TITLE INSURANCE POLICY, IN CONTEXT IT MUST BE INTERPRETED AS HAVING REFERENCE TO AN OWNER'S TITLE INSURANCE POLICY WHICH THE PURCHASER OF A RESIDENCE MAY OBTAIN FOR HIS OWN PROTECTION. THE SENTENCE INVOLVED MAKES IT CLEAR THAT AN EMPLOYEE WHO PURCHASES A RESIDENCE AT HIS NEW DUTY STATION MAY NOT BE REIMBURSED THE COST OF THE VARIOUS TYPES OF INSURANCE WHICH HE MAY PURCHASE FOR HIS OWN PROTECTION. SECTION 4.2 DOES NOT PROHIBIT REIMBURSEMENT OF THE COST OF INSURANCE POLICIES IN ALL CASES; IN FACT, THE COST OF INSURANCE FOR THE PROTECTION OF THE LENDER, WHEN UNDER THE CUSTOM OF THE AREA THE PURCHASER MUST PAY SUCH COSTS IN ORDER TO SECURE FINANCING, IS SPECIFICALLY ALLOWABLE."

WE HAVE, IN SEVERAL DECISIONS, HAD OCCASION TO INTERPRET THE HOLDING IN 46 COMP. GEN. 884 WITH RESPECT TO CLAIMANTS WHO HAVE, UNDER CIRCUMSTANCES SIMILAR TO THOSE OF MESSRS. EXON AND HOLSTEEN, RELIED ON THE LANGUAGE IN THAT DECISION TO SUPPORT CLAIMS SEEKING REIMBURSEMENT FOR THE COST OF MORTGAGE GUARANTEE INSURANCE. WE HAVE CONSISTENTLY HELD THAT THE HOLDING IN 46 COMP. GEN. 884 IS LIMITED TO THE ALLOWANCE OF COSTS OF TITLE INSURANCE POLICIES REQUIRED TO BE PURCHASED BY A SELLER OF PROPERTY AS A MEANS OF ESTABLISHING MARKETABLE TITLE, AND HAVE NEVER REGARDED SUCH DECISION AS AUTHORITY FOR THE ALLOWANCE OF COSTS OF MORTGAGE GUARANTEE INSURANCE IN VIEW OF THE SPECIFIC PROHIBITION OF SUBSECTION 4.2D AGAINST PAYMENT OF COSTS OF "MORTGAGE INSURANCE." B-164416, JUNE 28, 1968; B- 162673, JUNE 3, 1968, AND NOVEMBER 13, 1967; B-163419, FEBRUARY 26, 1968; COPIES ENCLOSED.

ALTERNATIVELY, YOU ASK THAT THE OVERPAYMENT BE WAIVED UNDER THE PROVISIONS OF 5 U.S.C. 5584, AS ADDED BY PUBLIC LAW 90-616, APPROVED OCTOBER 21, 1968, SINCE THERE IS NO INDICATION OF FRAUD, MISREPRESENTATION, FAULT, OR LACK OF GOOD FAITH ON THE PART OF EITHER MR. EXON OR MR. HOLSTEEN IN REGARD TO THE ERRONEOUS REIMBURSEMENT. THE SECTION UNDER WHICH YOU MAKE YOUR CLAIM FOR WAIVER PROVIDES IN PART:

"SEC 5584. CLAIMS FOR OVERPAYMENT OF PAY

"(A) A CLAIM OF THE UNITED STATES AGAINST A PERSON ARISING OUT OF AN ERRONEOUS PAYMENT OF PAY, ON OR AFTER JULY 1, 1960, TO AN EMPLOYEE OF AN EXECUTIVE AGENCY, THE COLLECTION OF WHICH WOULD BE AGAINST EQUITY AND GOOD CONSCIENCE AND NOT IN THE BEST INTERESTS OF THE UNITED STATES, MAY BE WAIVED IN WHOLE OR IN PART BY -

"(1) THE COMPTROLLER GENERAL OF THE UNITED STATES *** "

THE QUESTION OF WHETHER REIMBURSEMENT UNDER 5 U.S.C. 5724AA)(4) FOR COSTS INCIDENT TO BUYING A NEW HOME UPON RELOCATION COULD BE HELD TO BE "PAY" FOR PURPOSES OF WAIVER OF THE CLAIM WAS CONSIDERED BY THIS OFFICE IN B- 165962, FEBRUARY 10, 1969. IN THAT DECISION WE NOTED THAT THE IMPLEMENTING REGULATIONS TO PUBLIC LAW 90-616, NOW FOUND AT 4 CFR 91 93, DEFINE THE TERM "PAY" AS FOLLOWS:

"SEC 91.2 DEFINITIONS.

"IN THIS CHAPTER:

"(B) 'PAY' MEANS SALARY, WAGES, PAY, COMPENSATION, EMOLUMENTS, AND REMUNERATION FOR SERVICES. IT INCLUDES OVERTIME PAY; NIGHT, SUNDAY, STANDBY, IRREGULAR AND HAZARDOUS DUTY DIFFERENTIAL; PAY FOR SUNDAY AND HOLIDAY WORK; PAYMENT FOR ACCUMULATED AND ACCRUED LEAVE; AND SEVERANCE PAY. IT DOES NOT INCLUDE EXPENSES OF TRAVEL AND TRANSPORTATION OR EXPENSES OF TRANSPORTATION OF HOUSEHOLD GOODS."

WE CONCLUDED IN THAT CASE THAT THE COST OF PURCHASING A NEW HOME UPON A TRANSFER TO A DIFFERENT DUTY STATION IS NOT "PAY" BUT, INSTEAD, IS REIMBURSEMENT FOR PERSONAL EXPENSES INCURRED IN THE INTEREST OF THE GOVERNMENT AND NOT RELATED TO COMPENSATION FOR SERVICES RENDERED, AND THAT THEREFORE THERE WAS NO BASIS FOR THE WAIVER OF THE CLAIM UNDER PUBLIC LAW 90-616.

THUS, MESSRS. EXON AND HOLSTEEN WERE NOT ENTITLED TO REIMBURSEMENT FOR THE COST OF THE MORTGAGE GUARANTEE INSURANCE PREMIUMS, AND AS WAIVER OF THEIR LIABILITY FOR THE AMOUNTS THEY WERE ERRONEOUSLY REIMBURSED IS NOT FOR CONSIDERATION, THERE IS NO ALTERNATIVE BUT TO AFFIRM THE MAY 19, 1970, ACTIONS OF OUR CLAIMS DIVISION AND OUR DECISION B-170571, NOVEMBER 9, 1970.