B-172157, MAY 27, 1971

B-172157, MAY 27, 1971

REAL ESTATE EXPENSES - FINANCE CHARGES DECISION CONCERNING CLAIM BY EDWIN C. GILLIATT, AN IRS EMPLOYEE, FOR $203, REPRESENTING EXPENSES INCURRED INCIDENT TO A CHANGE OF OFFICIAL STATION FROM FT. WAYNE, IND., TO CINCINNATI, OHIO. AN APPRAISAL FEE OF $30 AND A CREDIT REPORT COST OF $5 ARE CHARGES IN CONNECTION WITH CREDIT SECURED BY AN INTEREST IN REAL PROPERTY AND ARE NOT FINANCE CHARGES WITHIN THE MEANING OF SECTION 106(E) OF THE TRUTH IN LENDING ACT. THESE CHARGES ARE PROPER FOR REIMBURSEMENT UNDER OFFICE OF MANAGEMENT AND BUDGET CIR. NO. A-56, SECTION 4.2. THE $138 ATTORNEY'S FEE MAY ALSO BE PAID IF IT IS CLEARLY SHOWN THAT THE ITEM REPRESENTS A CHARGE FOR TITLE SEARCH NECESSARY TO THE PURCHASE OF THE RESIDENCE. HOWEVER, CLAIMANT'S TRAVEL TO THE RESIDENCE OF RELATIVES WAS NOT INCIDENT TO THE CHANGE OF STATION AND NO BASIS EXISTS UPON WHICH MILEAGE MAY BE ALLOWED IN LIEU OF LODGING AND FOOD, SINCE THE ITEM WAS NOT DIRECTLY RELATED TO THE OCCUPANCY OF TEMPORARY QUARTERS.

TO MISS VIRGINIA G. LEIST:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 29, 1971, REFERENCE AD:F:F:V, REQUESTING A DECISION WHETHER A RECLAIM VOUCHER IN THE AMOUNT OF $203 SUBMITTED BY MR. EDWIN C. GILLIATT, AN EMPLOYEE OF THE INTERNAL REVENUE SERVICE, FOR EXPENSES INCIDENT TO A CHANGE IN HIS POST OF DUTY FROM FORT WAYNE, INDIANA, TO CINCINNATI, OHIO, EFFECTIVE AUGUST 23, 1970, MAY BE ALLOWED.

THE RECORD SHOWS THAT MR. GILLIATT REPORTED AT HIS NEW POST OF DUTY IN CINCINNATI, OHIO, ON AUGUST 23, 1970, AND THAT HE COMPLETED THE TRANSACTIONS TOWARDS THE PURCHASE OF A HOME AT HIS OFFICIAL STATION ON SEPTEMBER 5, 1970. HE ORIGINALLY CLAIMED REIMBURSEMENT OF EXPENSES INCURRED INCIDENT TO HIS TRANSFER, WHICH INCLUDED SUBSISTENCE EXPENSE WHILE IN TEMPORARY LODGING IN CINCINNATI AND REIMBURSEMENT OF REAL ESTATE EXPENSE IN THE AMOUNT OF $312, AS SHOWN BY A STATEMENT FROM THE SAVINGS AND LOAN INSTITUTION, WHICH LISTED THE CHARGES MADE ON THE LOAN TO FINANCE THE PURCHASE OF HIS HOME AS FOLLOWS:

PREPAID FINANCE CHARGE:

SERVICE FEE $118.50

AMOUNT FINANCED INCLUDES:

APPRAISAL FEE 30.00

ATTORNEY FEE 138.00

CREDIT REPORT 5.00

ITEMIZED CHARGES EXCLUDABLE

FROM THE FINANCE CHARGE:

RECORDING FEE 20.50

TOTAL $312.00

AN ITEMIZATION OF BORROWER'S EXPENSE FURNISHED TO THE CLAIMANT BY THE SAVINGS AND LOAN COMPANY SHOWS THAT THE ATTORNEY'S EXPENSE OF $138 WAS IN CONNECTION WITH INVESTIGATING (FOR THE BUILDING ASSOCIATION ONLY) THE SECURITY OFFERED BY THE BORROWER.

IN THE PAYMENT OF THE VOUCHER, THE RECORDING FEE OF $20.50 WAS THE ONLY ITEM ADMINISTRATIVELY ALLOWED PERTAINING TO THE REAL ESTATE TRANSACTION. THE REMAINING ITEMS WERE NOT ALLOWED BECAUSE THEY WERE CONSIDERED FINANCE CHARGES NOT ALLOWABLE UNDER THE TRUTH IN LENDING ACT, PUBLIC LAW 90-321, APPROVED MAY 29, 1968, 82 STAT. 146. ALSO DISALLOWED WAS AN ITEM IN THE AMOUNT OF $30 IDENTIFIED AS MILEAGE TO PARENTS' HOME CLAIMED IN LIEU OF FOOD AND LODGING DURING PERIOD OF OCCUPANCY OF TEMPORARY QUARTERS.

MR. GILLIATT STATES, PERTAINING TO THE REAL ESTATE TRANSACTION, THAT HE ISSUED A CHECK FOR $312 TO MR. A. B. BUNTHOFF, ATTORNEY (PRESUMABLY AN EMPLOYEE OF THE LENDING INSTITUTION) FOR HIS SERVICES AS ITEMIZED ABOVE IN ASSURING THAT CLEAR TITLE WOULD BE TRANSFERRED TO CLAIMANT IN THE REAL ESTATE TRANSACTION. HE CONCEDES THAT THE ITEM OF $118.50 IS AN INTEREST- LIKE ITEM AND DOES NOT MAKE RECLAIM THEREFOR. CONCERNING THE TRIP HE TOOK TO HIS PARENTS' HOME FOR WHICH HE CLAIMED $30 MILEAGE, IT IS THE EMPLOYEE'S CONTENTION THAT THIS IS IN LIEU OF FREE LODGING AND FOOD THAT HE WOULD OTHERWISE CLAIM FOR TEMPORARY LODGING SUBSISTENCE EXPENSE, AND THEREFORE URGES THAT THE CLAIM FOR THAT ITEM IS JUSTIFIED.

SECTION 106 OF THE TRUTH IN LENDING ACT PROVIDES IN PERTINENT PART 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:

"(1) FEES OR PREMIUMS FOR TITLE EXAMINATION, TITLE INSURANCE, OR SIMILAR PURPOSES.

"(5) APPRAISAL FEES.

"(6) CREDIT REPORTS."

THIS HAS BEEN IMPLEMENTED BY SUBSECTION 226.4(E) OF REGULATION Z OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM, 12 CFR, PART 226.

SECTION 4.2C, OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, AS REVISED JUNE 26, 1969, PROVIDES IN PERTINENT PART THAT THE COSTS OF LEGAL AND RELATED SERVICES INVOLVED IN THE PURCHASE OF RESIDENCE MAY BE REIMBURSED AS FOLLOWS:

" *** COSTS OF *** SEARCHING TITLE, PREPARING ABSTRACT, AND LEGAL FEES FOR A TITLE OPINION *** COSTS OF PREPARING CONVEYANCES, OTHER INSTRUMENTS, AND CONTRACTS; RELATED NOTARY FEES AND RECORDING FEES; COSTS OF MAKING SURVEYS, PREPARING DRAWINGS OR PLATS WHEN REQUIRED FOR LEGAL OR FINANCING PURPOSES; AND SIMILAR EXPENSES. COSTS OF LITIGATION ARE NOT REIMBURSABLE."

SUBSECTION 4.2D OF CIRCULAR NO. A-56, PERTAINING TO MISCELLANEOUS COSTS THAT MAY BE ALLOWED IN THE PURCHASE OF A RESIDENCE, PROVIDES IN PERTINENT PART THAT:

" *** NOTWITHSTANDING THE ABOVE, NO FEE, COST, CHARGE, OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, AND REGULATION Z ISSUED PURSUANT THERETO BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. *** "

THE APPRAISAL FEE OF $30 AND THE CREDIT REPORT COST OF $5 WERE CHARGES IN CONNECTION WITH CREDIT SECURED BY AN INTEREST IN REAL PROPERTY AND ARE NOT FINANCE CHARGES WITHIN THE MEANING OF SECTION 106(E) OF THE TRUTH IN LENDING ACT AND SECTION 226.4(E) OF REGULATION Z. THESE CHARGES TOTALING $35 ARE THEREFORE PROPER FOR REIMBURSEMENT UNDER SECTION 4.2 OF CIRCULAR NO. A-56.

WITH RESPECT TO THE ATTORNEY FEE IN THE AMOUNT OF $138, THIS WAS FURTHER EXPLAINED IN THE RECEIPT ISSUED BY THE SAVINGS AND LOAN COMPANY TO MR. GILLIATT, WHEREIN IT WAS STATED THAT THE ATTORNEY'S EXPENSES IN THE AMOUNT OF $138 WERE CHARGES FOR INVESTIGATING (FOR THE BUILDING ASSOCIATION ONLY) THE SECURITY OFFERED BY THE BORROWER. WE DO NOT UNDERSTAND THAT STATEMENT. IF IT WAS INTENDED TO REFLECT A CHARGE FOR SEARCH OF TITLE NECESSARY FOR CONSUMMATION OF THE PURCHASE, IT WOULD APPEAR TO BE ALLOWABLE. HOWEVER, THE CLAIMANT HAS SAID THAT THE ATTORNEY WAS REPRESENTING HIM IN THE MATTER, WHICH WOULD INDICATE THAT THE ATTORNEY'S SERVICES MIGHT HAVE BEEN IN ADDITION TO A TITLE SEARCH PERFORMED BY SOME OTHER INDIVIDUAL OR COMPANY. IF A STATEMENT IS FURNISHED FROM THE LAWYER OR THE LOAN INSTITUTION WHICH CLEARLY SHOWS THAT THE ITEM DOES REPRESENT A CHARGE FOR SEARCH OF TITLE NECESSARY TO THE PURCHASE OF THE RESIDENCE, SUCH AMOUNT MAY BE CERTIFIED FOR PAYMENT.

AS FOR THE $30 MILEAGE ITEM, THE TRAVEL TO THE RESIDENCE OF RELATIVES WAS NOT INCIDENT TO MR. GILLIATT'S CHANGE IN OFFICIAL DUTY STATION AND THE FACT THAT HE MAY HAVE SAVED THE GOVERNMENT THE COST OF 2 DAYS TEMPORARY SUBSISTENCE ALLOWANCE PROVIDES NO BASIS UPON WHICH THE MILEAGE MAY BE ALLOWED IN LIEU OF LODGING AND FOOD, SINCE THE ITEM WAS NOT DIRECTLY RELATED TO THE OCCUPANCY OF THE TEMPORARY QUARTERS. THERE IS NO AUTHORITY UNDER THE ACT AND IMPLEMENTING REGULATIONS FOR PAYMENT OF MILEAGE FOR SUCH TRAVEL.

THE VOUCHER AND ATTACHMENTS ENCLOSED WITH YOUR LETTER ARE RETURNED FOR ACTION IN ACCORDANCE WITH THE FOREGOING.