Board of Contract Appeals General Services Administration Washington, D.C. 20405 __________________ May 15, 2000 __________________ GSBCA 15235-RELO In the Matter of RAYMOND G. O KEEFE Raymond G. O Keefe, Birmingham, MI, Claimant. Michele E. Kilgore, Central Administrative Support Center, Department of Commerce, Kansas City, MO, appearing for Department of Commerce. HYATT, Board Judge. Claimant, Raymond G. O Keefe, is an employee of the National Weather Service (NWS). He transferred from Buffalo, New York to White Lake, Michigan. In connection with his relocation, he was authorized, among other items, reimbursement of real estate transaction expenses. Mr. O Keefe did not own a home in Buffalo, but did decide to purchase one in Michigan. The issue before us is whether expenses associated with a second mortgage needed to complete the purchase of the new home may be reimbursed. Mr. O Keefe explains that he purchased his new residence with a down payment, a first mortgage, and a second mortgage in a smaller amount. Claimant incurred $458 in expenses connected with securing the second mortgage, which was a part of the financing package on the new home. He cites a Comptroller General decision, Arthur J. Kerns, Jr., 60 Comp. Gen. 650 (1981), for the proposition that expenses incurred in obtaining a second mortgage loan are reimbursable.[foot #] 1 The agency disallowed this portion of Mr. O Keefe s claim, reasoning that second mortgage expenses could not be reimbursed. In arriving at this conclusion, the agency stated that only expenses associated with the primary loan could be reimbursed. ----------- FOOTNOTE BEGINS --------- [foot #] 1 The Comptroller General was the Board's predecessor in resolving claims for travel and relocation expenses incurred by federal civilian employees. ----------- FOOTNOTE ENDS ----------- In the agency s view, the second loan on the same property generated duplicate charges which should be disallowed, although the agency does not explain why it concludes the charges would be duplicative. Kerns was regarded as distinguishable because the second mortgage in that case was obtained on the old residence to bridge a financing gap until the old home could be sold. Discussion In addition to Kerns, the Comptroller General has issued decisions that are directly on point and support claimant s point of view. Leland D. Pemberton, 61 Comp. Gen. 607 (1982); James J. Beirs, B-184703 (Apr. 30, 1976). Both Leland and Beirs involved second mortgages taken on the new residences. As a general proposition expenses incurred in connection with second mortgage transactions are reimbursable to the same extent as expenses incurred in connection with first mortgages insofar as they are reasonable in amount and otherwise allowable under the regulations, provided that they are not charges assessed to compensate the lender for the high risk involved.[foot #] 2 In further explaining the rationale for allowing these costs, the Comptroller General has observed: The common thread . . . is that the financial transactions involved in each of the cited decisions, i.e., a second mortgage, as release of liability, deeds of trust, and a new mortgage, were secured by the employee's interest in his residence at his old duty station or his residence at his new duty station at the time of the transfer. . . . Since the employee, in most instances, must sell his old residence or secure a second mortgage on the old or new residence in order to purchase a residence at his new official station, we viewed the financial transactions, each of which involved the employee's security interest in his residence at his old or new duty station, as being, in reality, one total financial package. Robert L. Flint, 62 Comp. Gen. 426 (1983) (citations omitted). The Comptroller General's reasoning in these cases is sound and we follow it. Assuming the costs claimed by Mr. O'Keefe with respect to the second mortgage transaction are otherwise allowable, he may properly be reimbursed. ----------- FOOTNOTE BEGINS --------- [foot #] 2 Expenses of obtaining a personal loan, not secured by the property to be purchased, are not considered to be real estate transaction expenses and thus may not be reimbursed. Leland D. Pemberton, 61 Comp. Gen. 607 (1982). ___________________ ----------- FOOTNOTE ENDS ----------- _________________________________ CATHERINE B. HYATT Board Judge