Board of Contract Appeals

                 General Services Administration

                      Washington, D.C. 20405







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                        November 30, 2005

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                         GSBCA 16678-RELO





                In the Matter of TERENCE L. LYNCH





     Terence L. Lynch, Odenton, MD, Claimant.



     Sandra S. Williams, Program Analyst/Authorized Certifying Officer, National Finance

Center, Office of the Chief Financial Officer, Department of Agriculture, Washington, DC,

appearing for Department of Agriculture.



DeGRAFF, Board Judge.



     In order to determine whether an employee has incurred and paid a real estate

transaction expense, we look to the settlement statement.  A commitment fee paid by a

borrower in order to bind a lender to certain loan terms is not a reimbursable expense.  



                            Background



     The United States Department of Agriculture (USDA) selected Terence L. Lynch to

fill a position in Maryland, and Mr. Lynch moved there in August 2001.  In connection with

his move, Mr. Lynch purchased a house near his duty station.  Although USDA reimbursed

many of Mr. Lynch's real estate transaction expenses, it did not reimburse the amounts he

claimed for a survey fee ($175), a pest inspection fee ($155), and a commitment fee ($500). 



     USDA did not reimburse the survey fee because it was not listed on Mr. Lynch's

settlement statement (the HUD-1) as an expense incurred either at or outside of closing and

there was no canceled check or similar documentation to show Mr. Lynch paid this fee. 

USDA did not reimburse the pest inspection fee or the commitment fee because these were

listed on the HUD-1 as having been paid by the seller and there was no documentation to

show Mr. Lynch paid these fees. 



     Mr. Lynch asked his mortgage broker, AllState Lending Services, Inc., for assistance

in responding to USDA's denial of his request for reimbursement.  In a letter dated

September 24, 2003, AllState said Mr. Lynch obtained a loan insured by the Federal Housing

Administration (FHA), which does not allow purchasers to pay certain closing costs. 

AllState said in order to obtain FHA approval for Mr. Lynch's loan, the HUD-1 had to show

the seller paid the expenses that Mr. Lynch was not allowed to pay.  Even though the HUD-1

says it is a statement of actual settlement costs, AllState said the HUD-1 does not "reflect and

depict a 'true' account of [Mr. Lynch's] actual expenditures."  AllState's letter contained a

list of expenses which AllState described as a "more accurate account of the fees" Mr. Lynch

paid to purchase the house.  AllState's list of expenses allegedly paid by Mr. Lynch includes

the survey, pest inspection, and commitment fees.  Even so, the expenses listed in AllState's

letter total approximately $6000 less than the expenses shown on the HUD-1 as having been

paid by Mr. Lynch.  In a letter dated March 3, 2004, AllState said the commitment fee was

"charged by Lender for Extended Lock."  



     In addition to the information provided by AllState, Mr. Lynch provided copies of two

cashier's checks he used to purchase his house.  These checks are for large lump sums and

do not show what expenses they covered.  One check is dated six weeks before closing and

is for the precise amount Mr. Lynch paid as an earnest money deposit.  The second check is

not large enough to cover the amount Mr. Lynch was required to pay at closing according to

the HUD-1 plus the amount of the fees for which he now claims reimbursement.  



     After considering the letters from AllState and the copies of the checks provided by

Mr. Lynch, USDA decided once again to deny Mr. Lynch reimbursement for the survey fee,

the pest inspection fee, and the commitment fee.  Mr. Lynch asked for a review of USDA's

decision, and USDA submitted the claim to us.



                            Discussion



     Although USDA reimbursed many of Mr. Lynch's real estate purchase expenses, we

are not sure it had the authority to do so.  The documents we have suggest Mr. Lynch might

have been a newly appointed federal employee in August 2001, and new employees are not

eligible to be reimbursed for real estate transaction expenses.  Kevin R. Kimiak, GSBCA

16641-RELO, 05-2 BCA   33,007.  However, the documentation we have is incomplete, due

in part to the forced evacuation of USDA staff in the wake of Hurricane Katrina, and it is

possible USDA was authorized to reimburse Mr. Lynch for his expenses.  Because our record

is incomplete, we assume USDA was authorized to reimburse his expenses and we address

the claim accordingly.  



     Provided certain requirements are met, when an employee transfers in the interest of

the Government, the employing agency is required to reimburse some of the expenses the

employee incurs in purchasing a residence at the new duty station.  5 U.S.C.   5724a(d)

(2000).  The applicable regulations provide that the employee must actually incur and pay

an expense in order to be reimbursed.  41 CFR 302-6.1(f)(1) (2001). 



     In order to determine whether an employee has incurred and paid an expense, we look

to the settlement statement. Frank C. Cairo, GSBCA 15975-RELO, 03-1 BCA   32,152;

Marion L. Ladd, GSBCA 15138-RELO, 00-1 BCA   30,890.  When a settlement involves a

"federally related" mortgage loan, the HUD-1 ought to be the most reliable evidence of an

employee's real estate transaction expenses, because federal statute and regulation require

the amounts listed on the HUD-1 to itemize clearly all charges imposed upon the borrower,

and require the HUD-1 to be used as a statement of actual charges made in connection with

a settlement.  12 U.S.C.   2603(a) (2000); 24 CFR 3500.8(b), Appendix A (2001). 

Mr. Lynch's HUD-1 does not show the survey fee at all, and it shows the commitment fee

and the pest inspection fee as expenses incurred and paid by the seller.  Thus, looking at the

HUD-1, we cannot conclude that Mr. Lynch paid the fees for which he claims

reimbursement.



     In support of his claim, Mr. Lynch asks us to look at two cashier's checks.  Neither

check shows what expenses it covered.  It seems quite likely, however, that one check was

for his earnest money deposit.  Although the other check was large enough to cover the

closing costs which the HUD-1 shows Mr. Lynch paid, it was not sufficient to cover, in

addition, the amount he claims to have paid for the fees in question.  The two checks do not

establish Mr. Lynch paid the commitment fee, the pest inspection fee, and the survey fee. 



     Mr. Lynch also asks us to consider the statements made by AllState regarding the

HUD-1.  We do not find these statements reliable because they are contrary to the face of the

HUD-1, which says it is a statement of actual costs.  AllState's statements are also unreliable

because there is a $6000 discrepancy between the total amount AllState says Mr. Lynch paid

in connection with his purchase and the amount the HUD-1 shows he paid.  AllState's

statements do not establish Mr. Lynch paid the fees for which he asks to be reimbursed.  



     Finally, even if Mr. Lynch could establish he paid the commitment fee, he could not

be reimbursed for it.  This fee, which is paid by a borrower in order to bind a lender to certain

loan terms, is a finance charge and according to the applicable regulations, finance charges

are not reimbursable unless specifically authorized.  A commitment fee is not a specifically

authorized reimbursable expense.  41 CFR 302-6.2(d)(2) (2001); Charles W. Adams, GSBCA

16485-RELO, 05-1 BCA   32,956.



     The claim is denied.









                                   __________________________________

                                   MARTHA H. DeGRAFF

                                   Board Judge