Claim for Mortgage Prepayment Penalty

The Department of Agriculture requested a decision as to whether a voucher representing a mortgage prepayment penalty may be certified for payment as a relocation expense. An employee claimed a mortgage prepayment penalty incurred when he sold his residence in connection with a permanent change of station. The penalty provision was not contained in the mortgage document itself. The claimant stated that a verbal agreement concerning penalties was made at the time of the sale but was inadvertently omitted from the documents of sale. His verbal agreement was embodied in a written agreement executed approximately 7 months after the date of the sale. Federal Travel Regulations authorize reimbursement for mortgage prepayment penalties when incorporated in the security instrument. In this case, the claimant made a verbal agreement at the time he bought his residence to pay 180 days' interest if he prepaid the loan. The prepayment penalty clause was inadvertently omitted from the security instrument. However, the agreement was reduced to writing several months prior to the sale of the residence. Therefore, GAO considered the agreement to be incorporated in the security instrument. The claimant was to be reimbursed the penalty paid if his claim was otherwise proper.