Pamela L. Swires

B-260724 Sep 21, 1995 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights 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. 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. 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. A transferred employee was charged a closing coordination fee incident to the purchase of a residence. View Decision Matter of: Pamela L. Swires File: B-260724 Date: September 21, 1995 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. Sec. 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. 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. 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. Sec. 302-6.2(f) (1994). 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. Sec. 302-6.2(c) (1994). DECISION 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. Sec. 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.