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B-194822 1 (1980-09-24)

handle is hein.gao/gaobadiov0001 and id is 1 raw text is: THE COMPTROLLER GENERAL DECISION OF THE UNITED STATES WASHINGTON, D. C. 20548 FILE: B-194822 DATE: September 24, 1980 MATTER OF: First National Bank of New Jersey DIGEST: Bank reported property improvement loan to Department of Housing and Urban Development (HUD) for insurance coverage when loan was already in default. HUD billed Bank for premiums which were duly paid and then denied Bank's claim for indemnity. HUD had no author- ity to accept loan report on defaulted loan, to collect premiums, and to provide insurance coverage. 12 U.S.C. § 1703(f); 24 CFR 201.10. Loan was never insured and claim may not be paid. The First National Bank of New Jersey (Bank) asks that we allow its insurance claim, denied by the Department of Housing and Urban Development (HUD), for reimbursement of a $3,200 loss sustained when the borrower defaulted on a property improvement loan which the Bank maintains was Federally-insured. Upon review of the applicable law and regulations, we conclude that the claim should not be paid. The Bank was an approved lender eligible to obtain so-called Federal Housing Administration (FHA) insurance against possible losses that it might sustain on loans made for home improvement purposes. 12 U.S.C. § 1703(a). It made such a loan to Gordon Mead in the amount of $3,200 on a promissory note dated February 22, 1977. Through administrative oversight, the Bank failed to report the loan to HUD for insurance purposes until August 1978, after the loan was in default, when it also filed a claim for indemnifi- cation. Apparently not recognizing that the loan was in default, HUD, on its September 1, 1978 monthly billing statement, billed the Bank for the initial and first renewal premiums in the amount of $16 each. The Bank paid these premiums on October 24, 1978, approximately two months after the claim was filed.

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