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).