In the Matter of the Petition by

ELLIS BURGOYNE
4527 Wildcat Circle

          at

Antioch, CA 94509-7149

P. S. Docket No. DCA 94-68

APPEARANCE FOR PETITIONER:
George Banks, Postmaster
United States Postal Service
2000 Allston Way
Berkeley, CA 94704-9998

APPEARANCE FOR RESPONDENT:
Maria T. Robinson, Esq.
Burlingame Office
United States Postal Service
577 Airport Blvd., Suite 200
Burlingame, CA 94010-2040

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

Petitioner, Ellis Burgoyne, filed a petition requesting an oral hearing under the Debt Collection Act of 1982, as amended, 5 U.S.C. §5514(a), based on a Notice of Involuntary Administrative Salary Offsets received by him on July 14, 1994.¹  The notice advised Petitioner that action would be taken to collect a debt in the amount of $4,252.06 based on Petitioner’s failure to repay certain relocation advances.²

At Petitioner’s request a hearing was held in San Francisco, CA. Three witnesses, all Postal Service employees, testified at the hearing on behalf of Respondent. Petitioner testified on his own behalf.

FINDINGS OF FACT

1. In 1991 Petitioner was employed by the Postal Service as Director, Finance, EAS-22, Inglewood, CA. In October of that year he was promoted to Financial Analyst, Principal, EAS-25, located in the Southern Regional Headquarters, Memphis, TN (Attachment, Petition for hearing; Transcript (Tr.) 143-44, 147).

2. In late 1992, Petitioner’s position in Memphis was abolished. He was thereafter offered the position of Postmaster, EAS-26, Oakland, CA, which he accepted. He was asked to report to Oakland by January 1,1993. In order to expeditiously sell his house in Memphis and move his family with him, Petitioner agreed to pay $1500 in buyer closing costs and a $350 home warranty fee, costs not usually incurred by the seller. He also paid a $75 tax service fee. With the exception of the tax service fee the Postal Service does not reimburse its employees for such fees when selling their homes.³ (Id. (Petition); Tr. 105, 148-53)

3. Upon arrival in California Petitioner rented housing for a six-month period while he searched for a new house to purchase. Petitioner was able to locate a suitable house at a price of $212,000. He applied for financing with Amvest Mortgage Corporation ("Amvest"). Amvest, a mortgage broker, recommended by the seller, provided Petitioner with a "Good-Faith Estimate" of anticipated closing costs, which included a 1.5% loan origination fee and $275 for a mortgage broker fee (Tr. 157, 163-65; Petitioner’s Exhibit (PX)-3).

4. A mortgage broker’s fee is a fee ordinarily paid by a lender to the broker in return for the broker referring a client (home purchaser) to the lender (PX-3). The Postal Service reimburses its reassigned EAS employees loan origination fees paid, but does not reimburse them mortgage broker fees paid(Tr. 49-51; Respondent’s Exhibit (RX)-1).

5. Handbook F-12, June 1991, which sets forth Postal Service relocation policies states in pertinent parts:

"622 Broker’s fees and real estate commissions ...
no such [broker’s] fee or commission is
reimbursable when you buy a home at your new
official station.

* * *

624.2 Reimbursable costs ...

* * *

L. Loan origination fee ... associated with
the purchase of a residence at the new
official duty station. Limited to no more
than 1 percent of the value of associated
loan." (RX-1)

6. The lender, GN Mortgage Corporation, subsequently also gave Petitioner a good faith estimate of settlement costs. The estimate contained an amount of $3148.50 "loan origination fee" (1.375% of the loan amount of $190,800 plus an unidentified fixed sum of $525). No amount is shown for a mortgage broker fee (Tr. 166-67; PX-3). However, the document clearly states that the 1.375% loan origination cost is a fee to be paid to Amvest Mortgage, the mortgage broker (PX-3).

7. On July 15, 1993, Petitioner settled on the new house. The closing statement prepared and furnished by the title company showed a charge to Petitioner of $525 "loan origination fee" and $2673.50 as a "mortgage broker fee." Both fees were designated to be paid to GN Mortgage Corporation, the lender. A charge designated "Yield Differential" in the amount of $1908 was shown to be paid "to Broker." The $1908 amount was marked "poc" (paid outside contract) (PX-3; Tr. 169-73).

8. In late 1993 or early 1994 Petitioner sought to have the buyer’s closing costs which he paid on the sale of his house in Memphis (Finding of Fact No. 2) and the $2673.50 mortgage broker fee amount credited against an outstanding travel and relocation advance. The Postal Service refused to recognize such costs as reimbursable to Petitioner (Attachment, Petition for Hearing; Tr. 20, 23-24, 98, 104-05; RX-2, 3, 5).

9. Petitioner thereafter filed requests for deviation from the regulations pursuant to section 180 of Handbook F-12. Subsection 181 states in part:

"Requests for deviations where specific allowance
parameters are set forth in this handbook will not
be considered. In rare circumstances, however,
you might need to request a deviation from these
regulations. ...Deviations are allowed only in
extreme circumstances." (Attachment, Petition for
Hearing; PX-2).

10. Petitioner’s April 7, 1994 deviation request to the Finance Manager, Southeast Area Office, which sought a $1925 credit for the buyer closing cost, home warranty, and tax service fee specifically stated, "Under normal circumstances these changes [sic] are not allowable." (Attachment, Petition for Hearing).

11. Petitioner’s March 25 1994 deviation request to the District Manager, Customer Service and Sales, Oakland, CA stated in pertinent part:

"I am asking for your favorable consideration of
the deviation outlined below (Section 180 of
F-12).

1. Mortgage Broker Fees - New Duty Station
$2673 in mortgage broker fee should be
allowed since they are normal costs associated
with buying a home in Northern California.
These fees could not be avoided and were
non-negotiable." (RX-6).

12. After careful consideration, both deviation requests were denied in a letter to Petitioner from the Manager, Finance, Pacific Area Office, San Bruno, CA , the individual authorized to so act. The letter stated:

"This is in response to your request for deviation
from the F-12, Relocation Policy handbook.

You have requested reimbursement for a mortgage
broker fee on the purchase of your residence in
Antioch, CA. As this is not a customary or required
fee, the request is denied. The use of a mortgage
broker was an option available to you when
arranging financing, not a requirement for that
purchase.

We are unable to respond to your request for
reimbursement of miscellaneous closing costs at
your former duty station as sufficient documentation
has not been provided. Documentation has been
requested but not received. Therefore, the
reimbursement of miscellaneous closing costs is
denied."

(Tr. 96-99; RX-6)

DECISION

It is Petitioner’s position that he should be allowed the total amount in issue ($4252.06) as a credit against the amount of his outstanding travel and relocation advance. He contends in regard to the $2673.50 mortgage broker’s fee that the fee in fact was a loan origination fee and therefore a reimbursable cost. He posits that the July 15, 1993 closing statement (Finding of Fact No. 7) contained an erroneous transposition of figures for the mortgage broker fee and loan origination fee. He also contends the "Yield Differential" amount of $1908 was in fact the mortgage broker fee.

In regard to the buyer closing cost, home warranty, and tax service fee (totaling $1925), Petitioner argues that the amount should be recognized as reimbursable as the costs were necessary for the quick sale of his Memphis house so that he could report to Oakland by January 1,1993, with his family.

Alternatively, Petitioner contends the deviation requests should have been granted. According to Petitioner, Respondent’s denial of his requests constituted an abuse of discretion. Finally, he contends the Manager, Finance, Pacific Area Office, lacked authority to act on the deviation requests.

None of Petitioner’s arguments has merit. Although a mortgage broker’s fee is ordinarily paid by a lender and not the borrower, the record in this matter clearly establishes that Petitioner was to be liable for the payment of some mortgage broker fee. The initial "Good Faith Estimate" given to Petitioner by Amvest contained an amount for a mortgage broker fee. GN Mortgage Corporation’s good faith estimate showed a fee designated "loan origination" of $2623.50 to be paid to Avmest, the mortgage broker. An unidentified fixed sum of $525 was also included in the estimate. The subsequent closing statement of July 15, 1993, showed a mortgage broker fee of $2673.50. The previously unidentified $525 fixed sum was identified as a loan origination fee. Although the $2673.50 amount was designated for payment to the lender, presumably the lender would pass that amount on to the broker as payment for the latter’s fee. There is no persuasive evidence in the record to support Petitioner’s contention that the $2673.50 amount designated on the closing statement as a mortgage broker fee was in fact a loan origination fee. Petitioner presented no evidence in the form of testimony or affidavit from any representative of the lender, mortgage broker, or title company which would support his position. Absent such supporting evidence his contention that the closing statement was erroneous is rejected.

In rejecting Petitioner’s contention, it is also noted that such argument was not made to Respondent by Petitioner prior to the hearing in this matter. Petitioner’s March 25, 1994 deviation request referred to the fee in issue specifically as a mortgage broker fee. He never contended it was in fact a loan origination fee.

In regard to the buyer’s costs and the home warranty cost, Petitioner’s election to assume such costs was solely for his own convenience. Petitioner desired to sell his Memphis residence as quickly as possible in order to move his family with him to California by January 1, 1993. Petitioner’s April 7, 1994 deviation request recognizes that such costs ordinarily are not allowable.

There is no evidence in the record to support Petitioner’s position that Respondent arbitrarily rejected his deviation requests.⁴ The regulation permitting deviations specifically states that they are to be allowed only in extreme circumstances and will not be considered when specific allowance parameters are set forth. As stated, Petitioner’s election to pay the buyer’s costs and the warranty cost were for his own convenience. In regard to the mortgage broker fee, the Manager, Finance, carefully considered the deviation request before rejecting it.

Petitioner’s final argument that the Manager, Finance, lacked authority to act on the deviation requests is contrary to the testimony in the record. The Finance Manager specifically described his authority, and it encompassed deviation rulings.

In summation, Petitioner is not entitled to a credit of the amount in issue, $4252.06, except for the $75 tax service fee which counsel stipulated that he is entitled to receive. Respondent may deduct $4177.06 in incremental payments from Petitioner’s salary.

James D. Finn, Jr.
Administrative Judge

¹ The parties have stipulated that the 60-day period for issuance of the decision in this matter is waived.

² The actual amount of the alleged debt is $4598 ($1925 costs for the sale of Petitioner's house in Memphis, and a $2673 fee paid by Petitioner for the purchase of a house in California). The record does not disclose the reason for the assessment of the lower amount.

³ Counsel for Respondent stipulated at the hearing that Petitioner is now entitled to receive a credit for the $75 tax service fee (Tr. 105).

⁴ It is assumed without deciding that this issue is a matter for proper consideration in this proceeding.