B-168674, SEP 8, 1972

B-168674, SEP 8, 1972

CIVILIAN EMPLOYEE - SALE OF RESIDENCE - "TRANSFER FEES" DECISION REGARDING PENDING COLLECTION ACTION BY THE DEPARTMENT OF THE ARMY AGAINST A. WAYNE SIMPSON TO COLLECT A $100 "TRANSFER FEE" PAID CLAIMANT IN CONNECTION WITH HIS SALE OF A RESIDENCE INCIDENT TO A CHANGE OF STATION. REGARDLESS OF THE TREATMENT OF THE TRANSACTION AND FEE FOR THE PURPOSES OF THE TRUTH IN LENDING ACT, THERE IS NO AUTHORITY IN SECTION 4.2 OF OMB CIRCULAR NO. A-56 TO PERMIT REIMBURSEMENT OF A FEE CHARGED BY A LENDING INSTITUTION INCIDENT TO AN INFORMAL ASSUMPTION OF A MORTGAGE. SINCE IT APPEARS THAT THE FEE COVERS BOOKKEEPING, OVERHEAD, CLERICAL AND OTHER MISCELLANEOUS COSTS INVOLVED IN THE TRANSACTION, IT IS NOT REIMBURSABLE.

TO MR. A. WAYNE SIMPSON:

WE REFER TO YOUR LETTER OF JULY 27, 1972, CONCERNING THE INFORMAL INQUIRY WHICH WAS ISSUED BY THE ARMY AUDIT STAFF, FIELD OPERATIONS DIVISION, U.S. GENERAL ACCOUNTING OFFICE WITH RESPECT TO REIMBURSEMENT OF THE $100 "TRANSFER FEE" WHICH YOU PAID IN CONNECTION WITH YOUR PURCHASE OF A RESIDENCE IN SAN ANTONIO, TEXAS, INCIDENT TO YOUR CHANGE OF OFFICIAL STATION AS AN EMPLOYEE OF THE DEPARTMENT OF THE ARMY.

YOU SAY THAT THE INFORMAL INQUIRY IN QUESTION HAS RESULTED IN COLLECTION ACTION TO RECOVER THE $100 YOU WERE REIMBURSED FOR THE SUBJECT TRANSFER FEE. IN CONSIDERING THE PROPRIETY OF THIS REIMBURSEMENT THE "TRANSFER FEE" WAS TREATED AS A LOAN ASSUMPTION FEE, WHICH HAS BEEN HELD TO BE PART OF THE COST OF MONEY WHICH MAY NOT BE REIMBURSED TO EMPLOYEES UNDER SECTION 4.2D OF BUREAU OF THE BUDGET (NOW OFFICE OF MANAGEMENT AND BUDGET) CIRCULAR NO. A-56. B-170787, NOVEMBER 17, 1970, COPY ENCLOSED. A LETTER TO YOU FROM THE LENDERS, THE SAN ANTONIO SAVINGS ASSOCIATION, A COPY OF WHICH YOU ENCLOSED, INDICATES THAT THE FEE IS TREATED AS A "LATE PAYMENT, DELINQUENCY, DEFAULT, REINSTATEMENT OR OTHER SUCH CHARGE" AND, THEREFORE, UNDER SECTION 226.4(C) NOT A FINANCE CHARGE. APPARENTLY THE TRANSACTION INVOLVED DID NOT INVOLVE YOUR FORMAL ASSUMPTION OF THE OBLIGATION OF THE PREVIOUS OWNER SO FAR AS THE SAN ANTONIO SAVINGS ASSOCIATION IS CONCERNED BECAUSE THEY DID NOT AGREE IN WRITING TO SUCH ASSUMPTION. THEREFORE, THEY DID NOT CONSIDER A DISCLOSURE UNDER THE PROVISIONS OF THE TRUTH IN LENDING ACT NECESSARY. WE HAVE DISCUSSED THIS SITUATION WITH OFFICIALS AT THE FEDERAL RESERVE BOARD WHO HAVE ADVISED US THAT DISCLOSURES UNDER THE TRUTH IN LENDING ACT ARE NOT REQUIRED WHEN THE PURCHASER OF A RESIDENCE DOES NOT FORMALLY ASSUME THE OBLIGATION UNDER A MORTGAGE LOAN.

HOWEVER, REGARDLESS OF THE TREATMENT OF THE TRANSACTION AND FEE INVOLVED FOR PURPOSES OF THE TRUTH IN LENDING ACT, WE FIND NO AUTHORITY IN SECTION 4.2 OF CIRCULAR NO. A-56 WHICH WILL PERMIT REIMBURSEMENT OF A FEE CHARGED BY A LENDING INSTITUTION INCIDENT TO AN INFORMAL ASSUMPTION OF A MORTGAGE LOAN.

FURTHER, THE CHARGE HAS BEEN IDENTIFIED BY THE SAN ANTONIO SAVINGS ASSOCIATION AS SIMILAR TO A LATE PAYMENT, DELINQUENCY, DEFAULT OR REINSTATEMENT CHARGE. IN THE CIRCUMSTANCES IT APPEARS THAT THIS FEE COVERS ANY BOOKKEEPING, OVERHEAD, CLERICAL AND OTHER MISCELLANEOUS COSTS INVOLVED IN THE TRANSACTION AND IS OTHERWISE INCOME TO THE ASSOCIATION. IT WAS HELD IN B-173152, AUGUST 2, 1971, THAT FEES COVERING SUCH COSTS OF THE LOANING INSTITUTION ARE NOT REIMBURSABLE.

FOR THE REASONS STATED IT APPEARS THAT YOU SHOULD NOT HAVE BEEN REIMBURSED THE $100 TRANSFER FEE HERE INVOLVED AND THAT REFUND OF THAT PAYMENT IS REQUIRED.