B-169740, SEP. 24, 1970
Highlights
EMPLOYEE - TRANSFERS - REAL ESTATE EXPENSES - RECOVERY DECISION RESULTING FROM INFORMAL INQUIRY BY GAO CIVIL DIVISION CONCLUDING THAT EMPLOYEE WHO WAS REIMBURSED FOR CERTAIN REAL ESTATE EXPENSES INCIDENT TO PURCHASE OF HOME AT NEW STATION WHICH INCLUDED LENDER'S LOAN ORIGINATION FEE. IS ENTITLED TO RETAIN THE SUM OF $500 HE RECEIVED AS REIMBURSEMENT FOR CERTAIN EXPENDITURES MADE IN THE PURCHASE OF A HOME INCIDENT TO A CHANGE OF OFFICIAL STATION FROM DUBLIN. AMONG THE ITEMS FOR WHICH HE RECEIVED REIMBURSEMENT WERE THE FOLLOWING: $92 PREMIUM FOR MORTGAGE INSURANCE. AS TO THE THIRD ITEM A QUESTION WAS RAISED AS TO WHETHER THE LOAN ORIGINATION FEE COVERS ADMINISTRATIVE COSTS INCURRED IN PROCURING THE LOAN (WHICH ARE REIMBURSABLE UNDER APPLICABLE REGULATIONS) 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, SEP. 24, 1970
EMPLOYEE - TRANSFERS - REAL ESTATE EXPENSES - RECOVERY DECISION RESULTING FROM INFORMAL INQUIRY BY GAO CIVIL DIVISION CONCLUDING THAT EMPLOYEE WHO WAS REIMBURSED FOR CERTAIN REAL ESTATE EXPENSES INCIDENT TO PURCHASE OF HOME AT NEW STATION WHICH INCLUDED LENDER'S LOAN ORIGINATION FEE, AND "REVIEW FEE" MUST BE REFUNDED IN ABSENCE OF SHOWING THAT THE AMOUNT REPRESENTS CHARGES FOR ORIGINATING AND CLOSING THE LOAN AS DISTINGUISHED FROM "POINTS".
TO MR. VLADIMIR OLEYNIK:
YOUR LETTER OF MAY 5, 1970, REQUESTS OUR DECISION WHETHER MR. RICHARD L. GILBERT, AN EMPLOYEE OF THE DEPARTMENT OF LABOR, IS ENTITLED TO RETAIN THE SUM OF $500 HE RECEIVED 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, UNDER TRAVEL ORDER NO. 911-67- 10 DATED APRIL 18, 1967.
AMONG THE ITEMS FOR WHICH HE RECEIVED REIMBURSEMENT WERE THE FOLLOWING: $92 PREMIUM FOR MORTGAGE INSURANCE, $20 REVIEW FEE CHARGED BY THE MORTGAGE INSURER TO PAY LOCAL APPRAISERS TO SPOT-CHECK THE APPRAISALS MADE IN CONNECTION WITH MORTGAGE INSURED LOANS, AND $388 SERVICE FEE ON CONVENTIONAL LOAN PAID AS A LENDER'S LOAN ORIGINATION FEE CUSTOMARILY PAID BY THE BORROWER TO THE HOME SAVINGS AND LOAN ASSOCIATION, DURHAM, NORTH CAROLINA.
BY INFORMAL INQUIRY DATED MARCH 24, 1969, OUR CIVIL (AUDIT) DIVISION QUESTIONED REIMBURSEMENT FOR SUCH ITEMS ON THE STATED BASIS THAT THE FIRST TWO ITEMS "APPEAR TO BE MORE IN THE NATURE OF A REVIEW AND PREMIUM FOR A TYPE OF INSURANCE." AS TO THE THIRD ITEM A QUESTION WAS RAISED AS TO WHETHER THE LOAN ORIGINATION FEE COVERS ADMINISTRATIVE COSTS INCURRED IN PROCURING THE LOAN (WHICH ARE REIMBURSABLE UNDER APPLICABLE REGULATIONS) 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 LETTER DATED MAY 22, 1969, THE LENDER, HOME SAVINGS AND LOAN ASSOCIATION, DURHAM, NORTH CAROLINA, STATED THAT THE $92 WAS THE FIRST YEAR'S PREMIUM ON MORTGAGE INSURANCE COVERING THE TOP 20 PERCENT OF THE LOAN AND $20 FEE WAS A FEE CHARGED BY THE MORTGAGE INSURER "TO PAY LOCAL APPRAISERS TO SPOT CHECK THE APPRAISALS MADE IN CONNECTION WITH LOANS." THE LENDER ALSO STATED THAT THE $388 WAS A 2 PERCENT SERVICE FEE ON CONVENTIONAL LOANS, AND INDICATED THAT IT IS OTHERWISE KNOWN AS A LENDER'S LOAN ORIGINATION FEE OR "SERVICE FEE" CUSTOMARILY PAID BY THE BORROWER.
SECTION 4.2D, BUREAU OF THE BUDGET CIRCULAR NO. A-56, ISSUED PURSUANT TO THE ACT OF JULY 21, 1966, 80 STAT. 323, PUBLIC LAW 89-615, PROVIDED THAT COSTS OF MORTGAGE INSURANCE AND MORTGAGE DISCOUNTS ("POINTS") ARE NOT REIMBURSABLE.
WHILE A LOAN ORIGINATION FEE MAY REPRESENT REIMBURSABLE CHARGES MADE BY A LENDER TO COMPENSATE FOR EXPENSES INCURRED IN ORIGINATING AND CLOSING A LOAN INCIDENT TO THE PURCHASE OF A HOME AS DISTINGUISHED FROM "POINTS" WHICH IS A PART OF THE PRICE FOR THE HIRE OF THE MONEY (47 COMP. GEN. 213 (1967)), SUCH A SERVICE FEE MAY ALSO BE CHARGED TO COMPENSATE THE LENDER FOR MAKING A LOAN AT AN INTEREST RATE BELOW THE MARKET LEVEL AS A PART OF THE PRICE FOR THE HIRE OF THE MONEY LOANED.
WE ARE UNABLE TO DETERMINE WITH CERTAINTY FROM THE LETTER OF THE LENDER, THE HOME SAVINGS AND LOAN ASSOCIATION OF DURHAM, NORTH CAROLINA, THE PRECISE NATURE OF THE CHARGE MADE FOR THE "LOAN ORIGINATION FEE." THEREFORE, ON THE PRESENT RECORD MR. GILBERT IS NOT ENTITLED TO RETAIN THE $388 HE RECEIVED AS REIMBURSEMENT FOR THE LOAN ORIGINATION FEE. SEE B- 162494, OCTOBER 26, 1967, COPY HEREWITH. AS TO THE $92 FEE FOR MORTGAGE INSURANCE SEE SECTION 4.2D OF CIRCULAR NO. A 56, REVISED OCTOBER 12, 1966, WHICH PRECLUDES ALLOWANCE OF THIS TYPE OF FEE. SINCE THE $20 "REVIEW FEE" WAS CHARGED INCIDENT TO OBTAINING MORTGAGE INSURANCE, THAT FEE LIKEWISE IS NOT ALLOWABLE.
COLLECTION OF THE ENTIRE AMOUNT OF $500 RECEIVED BY MR. GILBERT SHOULD BE EFFECTED IN THE ABSENCE OF A CLEAR SHOWING THAT THE AMOUNT OF THE $388 (OR SOME PORTION THEREOF) REPRESENTS CHARGES FOR ORIGINATING AND CLOSING THE LOAN AS DISTINGUISHED FROM "POINTS."