BNUMBER:  B-265728
DATE:  June 7, 1996
TITLE:  Douglas Baxter

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Matter of:Douglas Baxter

File:     B-265728

Date:June 7, 1996

DIGEST

A transferred employee was reimbursed a $1,000 loan origination fee (1 
percent), but was denied reimbursement for a $700 loan processing fee.  
The lender provided an itemized breakdown of the loan processing fee 
with the notation that the term "loan origination fee" and the term 
"loan processing fee" are interchangeable.  If the fee represents part 
of the administrative cost of processing paperwork associated with a 
loan origination fee, this expense may not be reimbursed because the 
maximum amount allowable has already been paid as a loan origination 
fee.  If the fee is not part of the loan origination fee, then it is 
an additional charge by the lender incident to the extension of 
credit, i.e., a finance charge, and is not reimbursable under 41 
C.F.R.  sec.  302-6.2(d)(2)(v) (1995).  James A. Fairley, B-258932, Sept. 
19, 1995.

DECISION

This decision responds to a request from an authorized certifying 
officer, National Finance Center, United States Department of 
Agriculture (USDA).[1]  The question asked is whether a transferred 
employee may be reimbursed both a mortgage loan processing fee and a 
loan origination fee for the same real estate purchase transaction.  
The mortgage loan processing fee may not be reimbursed for the 
following reasons.

Mr. Douglas Baxter, an employee of the USDA's Rural Development 
Administration, was transferred from Klamath Falls, Oregon, to 
Woodland, California.  He reported for duty on May 15, 1994.  He had a 
residence constructed near his new duty station and went to settlement 
on October 7, 1994.  Among the real estate expenses charged was a 1 
percent loan origination fee ($1,000)[2] and a separate processing fee 
($700).  The agency reimbursed Mr. Baxter for the loan origination 
fee, but disallowed his claim for the processing fee.

Mr. Baxter has reclaimed the loan processing fee and submitted 
correspondence from the All Pacific Mortgage Company stating that the 
terms "loan origination fee" and "loan processing fee" are 
interchangeable.  The company also supplied an itemized listing of the 
expenses associated with the $700 processing fee.  Among the items 
listed was a charge for a loan underwriting fee.  The remaining items 
were administrative-type charges.

Section 302-6.2(d)(1)(ii) of the Federal Travel Regulation (FTR),[3] 
authorizes an employee to be reimbursed for a loan origination fee in 
an amount not to exceed 1 percent of the loan amount unless the lender 
itemizes his administrative charges to show by clear and convincing 
evidence that those charges do not include prepaid interest, points, 
or a mortgage discount.  The employee has already been reimbursed 
$1,000 as a loan origination fee of 1 percent.

A loan processing fee is identified as a finance charge under the 
Truth in Lending Act, 15 U.S.C.  sec.  1601, et seq., (1994), except for 
certain fees and expense items.  15 U.S.C.  sec.  1605(e).  The fees not 
included as finance charges are:  fees for title examination, title 
insurance or similar purpose; fees for preparation of deeds, 
settlement statement, or other documents; tax and insurance escrows; 
fees for notarized deeds and other documents; appraisal fees and 
credit reports.

There is no exception stated for the items listed in the lender's 
breakdown of Mr. Baxter's loan processing fee, i.e., the loan 
underwriting charge or the administrative charges.

The $700 loan processing fee charged to Mr. Baxter is not shown by the 
lender to be different than the expected administrative cost of 
processing paperwork which would be included as part to the loan 
origination fee.  If so, it may not be reimbursed since the full 1 
percent has already been paid as a loan origination fee.  If it is not 
considered part of the loan origination fee, then it must be deemed as 
addition charge imposed by the lender incident to the extension of 
credit and, thus, not reimbursable.  James A. Fairley, B-258932, Sept. 
19, 1995.[4]

Since section 302-6.2(d)(2)(v) of the FTR[5] prohibits reimbursement 
to the employee for a finance charge, Mr. Baxter may not be reimbursed 
for the $700 processing fee.

/s/Seymour Efros
for Robert P. Murphy
General Counsel 

1. Ms. Sandra S. Williams - Reference FSD - 1 RJP.

2. The attachment to the Settlement Statement shows that this fee was 
equally split between two parties, American Savings Bank and All 
Pacific Mortgage Company.

3. 41 C.F.R.  sec.  302-6.2(d)(1)(ii) (1995).

4. See also Deane H. Zeller, B-205873, May 4, 1982; and George C. 
Souders, B-248457, Sept. 29, 1992.

5. 41 C.F.R.  sec.  302-6.2(d)(2)(v) (1995).