Claim for Loan Origination Fee

An advance decision was requested concerning the reimbursement of a loan origination fee paid by a Defense Contract Audit Agency employee incident to the purchase of a home at his old duty station. The record indicated that the employee was transferred from his old duty station. Incident to his transfer, he entered into a loan agreement and paid a loan origination fee. The employee claimed that a portion of this fee was reimbursable to him as fees paid for service charges relating to his mortgage for purchase of a residence at his new duty station. His claim was limited to the amount stated because of the overall limitation on the reimbursement of real estate expenses. In support of his claim, the employee submitted a letter from the lender stating that the fee was in fact a service charge. The employee stated that it was improper to view this expense as a finance charge in light of the statement of the lender. Under applicable regulations, reimbursement of expenses incurred in connection with the sale or purchase of a house depends on whether an expense is the result of a finance charge as defined in the Truth in Lending Act. The primary purpose of the Act is to assure a meaningful disclosure of credit terms so that a consumer will be able to compare the various credit terms available to him and avoid the uninformed use of credit. Therefore, the finance charge is defined so as to distinguish between charges imposed as part of the cost of obtaining credit and charges imposed for services rendered in connection with a purchase or sale. GAO held that part of the origination fee used to cover the costs of running the lender's office was properly attributable to overhead and, like the portion attributable to underwriting procedures, should not be reimbursed. The loan origination fee reflected the mortgagee's administrative costs in connection with making the loan, was incident to the extension of credit, and was a nonreimbursable finance charge. Accordingly, the voucher should not be certified for payment.