BNUMBER: B-260724
DATE: September 21, 1995
TITLE: Pamela L. Swires
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Matter of:Pamela L. Swires
File: B-260724
Date: September 21, 1995
DIGEST
1. A transferred employee may not be reimbursed a loan origination
fee in excess of 1 percent of the loan amount unless the lender's
administrative charges are itemized and are shown by clear and
convincing evidence not to include prepaid interest, points, or a
mortgage discount. 41 C.F.R. 302-6.2(d)(1)(ii) (1994). Where a
lender's letter merely states that the fee does not contain any
charges for prepaid interest, points, or mortgage discount, but cannot
be further itemized, it does not meet the requirements of the Federal
Travel Regulation and the employee cannot be reimbursed any amount in
excess of the 1 percent loan origination fee already paid.
2. A tax service fee charged a transferred employee by a lender in
connection with a purchase mortgage loan is considered to be a finance
charge incident to the extension of credit and is therefore not
reimbursable. George C. Souders, B-248457, Sept. 29, 1992.
3. A transferred employee was charged a flood certification fee in
connection with the purchase of a residence. Since the certification
was required by law as a precondition to the granting of the mortgage
loan, such expense may be reimbursed. 41 C.F.R. 302-6.2(f) (1994).
4. A transferred employee was charged a closing coordination fee
incident to the purchase of a residence, a service similar to that
performed by a settlement or closing agent, involving the preparation
of legal documents after the loan has been approved and the review of
all final documents for accuracy. Therefore, since the amount charged
does not exceed the customary charge for such service in the area of
the residence, it may be reimbursed under 41 C.F.R. 302-6.2(c)
(1994).
DECISION
This decision responds to a request from an Authorized Certifying
Officer, National Finance Center, U.S. Department of Agriculture
(USDA),[1] concerning the entitlement of an employee to be reimbursed
certain real estate related expenses incurred incident to her
permanent change-of-station in April 1994. We conclude that, of the
expenses in question, only the expenses for flood certification and
the closing coordination fee may be reimbursed.
Mrs. Pamela L. Swires, an employee of the Rural Economic and Community
Development, Farmers Home Administration, USDA, stationed in Klamath
Falls, Oregon, was transferred to Eugene, Oregon, and reported for
duty there on April 4, 1994. Incident to that transfer, Mrs. Swires
purchased a residence in the vicinity of her new duty station. Some
of the expenses incurred were disallowed by the National Finance
Center. Mrs. Swires now requests reconsideration of her claim for the
following items:
Excess loan origination fee- $792
Tax service fee - 70
Flood certificate - 15
Closing coordination fee - 150
OPINION
Under the provisions of 5 U.S.C. 5724a(a)(4) (1988), and
implementing regulations contained in Part 302-6 of the Federal Travel
Regulation (FTR),[2] certain real estate expenses are authorized to be
paid. Section 302-6.2 of the FTR[3] lists the reimbursable and
nonreimbursable expenses incurred incident to the actual sale and
purchase of residences.
Loan origination fee
Section 302-6.2(d)(1)(ii) of the FTR[4] provides that reimbursement
for a loan origination fee may not exceed 1 percent of the loan amount
unless the employee shows by clear and convincing evidence that the
higher rate does not include finance charges (prepaid interest,
points, or a mortgage discount), and that the higher rate is
customarily charged in the area where the residence is located. Also,
a claim in excess of the 1 percent is to include an itemized list of
the lender's administrative charges. A general, explanatory letter
from a lender indicating that a fee does not include finance charges
and is customary in the area does not satisfy the itemization
requirement.[5]
Correspondence from the First Interstate Bank, dated January 11, 1995,
to Mrs. Swires states that the loan origination fee "cannot be
itemized, there is nothing to itemize." This statement falls short of
the requirements of the FTR, which in effect ask the bank to justify
any loan origination fee in excess of 1 percent by explaining the
specific costs to the bank the fee is used to offset. While we do not
dispute the bank's statement, we cannot allow the claim for the
portion of the fee that exceeds the 1 percent limit without further
explanation from the bank consistent with the regulation. If Mrs.
Swires is unable to obtain this further explanation, we must uphold
the denial of her claim for the excess loan origination fee by the
National Finance Center.
Tax service fee
Section 302-6.2(d)(2)(v) of the FTR[6] specifies that any "fee, cost,
charge, or expense determined to be part of the finance charge" under
the Truth in Lending Act and Regulation Z are not reimbursable. We
have held that a tax service fee is part of the lender's finance
charge incident to the extension of credit and not reimbursable.[7]
Therefore, this claim item may not be reimbursed to Mrs. Swires.
Flood certificate fee
Section 302-6.2(f) of the FTR[8] provides reimbursement authority for
other incidental charges for "required services" if they are
customarily paid by the purchaser of a residence at the new station,
but the amount reimbursed may not exceed the customary rate in the
locality of the residence. We have held that the phrase "required
services" as used in the FTR refers to those obligations imposed on
the employee by a lending institution, or by state or local law, as a
precondition to the sale or purchase of a residence. If they are so
imposed, they may be reimbursed. If they are not imposed by law or a
lending institution, they may not be reimbursed.[9]
We have been informed by an officer of Mrs. Swires's lending
institution, the First Interstate Bank of Oregon, that a residential
flood plain certification is now a legal requirement for all real
estate in Oregon for mortgage purposes. Therefore, since it is
required, it may be reimbursed as a miscellaneous real estate expense
under section 302-6.2(f) of the FTR, without requiring proof that the
property is in a flood plain.
Closing coordination fee
According to a letter dated October 21, 1994, from the U.S.
Department of Housing and Urban Development (HUD) to Mrs. Swires, she
was advised that a closing coordination fee is similar to the fee
charged to prepare final documents. We were also informed by the
officer of the First Interstate Bank of Oregon that this fee is
charged to cover the cost of after-the-loan-approval preparation of
some legal documents, and review all final documents to determine
accuracy and that their's and other's interests are fully protected.
Thus, it appears that this service is similar to that performed by a
settlement agent at a closing. Since no agent or attorney fee was
charged to perform the settlement or closing in this case, and in view
of the fact that the amount charged for this service is within the
range recognized by HUD as proper, this fee may be paid as a legal and
related expense item under section 302-6.2(c) of the FTR.[10]
/s/Seymour Efros
for Robert P. Murphy
General Counsel
1. Ms. Sandra S. Williams - Reference FSD-1 RJP.
2. 41 C.F.R. Part 302-6 (1994).
3. 41 C.F.R. 302-6.2 (1994).
4. 41 C.F.R. 302-6.2(d)(1)(ii) (1994).
5. Thomas P. Dercola, B-256771, Mar. 24, 1994, and decisions cited.
6. 41 C.F.R. 302-6.2(d)(2)(v) (1994).
7. George C. Souders, B-248457, Sept. 29, 1992, and decisions cited.
8. 41 C.F.R. 302-6.2(f) (1994).
9. Leonard L. Garofolo, 67 Comp. Gen. 449 (1988), and decisions cited.
10. 41 C.F.R. 302-6.2(c) (1994).