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B-194145 1 (1980-12-12)

handle is hein.gao/gaobaditc0001 and id is 1 raw text is: THE COIVIPTROLLER GENERAL . OF THE UNITED BTATES VVASHINGTON, D. C. 20548 FILE: B-194145 1' 17 DATE: December 12, 1980 MATTER OF: First Missouri Bank - National Housing Act Claim DIGEST: Bank's claim for reimbursement for loss sustained on several property improvement loans made to lessees is denied. Lessees were ineligible for insurance when loans were made, being neither owners of property nor having a lease expiring at least six months after maturity of loans as required by 12 U.S.C. 5 1703. Refinanced loan made after borrowers exercised their option to purchase property does not qualify for insurance since loans being refinanced were never validly insured. B.C. Tyner, an authorized certifying officer of the Department of Housing and Urban Development (HUD), asks whether he may certify for payment, in whole or in part, a voucher 'in the amount of $4,761.86 payable to the First nissouri Banklof St. Charles County, Missouri. b/e 4/ Tahe voucher covers a claimeforei Bfrsement of si' loss sustained on sevral property improvement loans)which the BankJ made to Robert and Pennie Leachjand submitted to HUD for insurancepursuant to Title 1 of the National Housing Act, as amended, 12 U.S.C. § 1703. [The Bank's claim was initially denied by HUD because, at the time the loans were made, the borrowers were not eligible for insurance, being neither the owners of the property nor lessees with a lease ex- piring at least six months after the maturity of the loans.^1 For the reasons set forth hereafter, it is our view that HUD's original deter- mination was correct and that the voucher may not be certified for pay- ment in whole or in part. The first loan, in the amount of $725, was made to the borrowers on April 5, 1976, for a term of 15 months. Shortly thereafter, the April 5 loan was consolidated with a second loan made on July 2, 1976, and a new note totalling $2,000, exclusive of interest, having a 36- month term, was reported to HUD for insurance as a refinancing. jAt the time both of these loans were made, the borrowers were occupying the property under a one-year lease terminating January 6, 1977. The third loan, in a principal amount of $3500 and having a term of 72 months, was made to the borrowers on August 5, 1976. Apparently, this was a separate loan and not a refinancing of the earlier loans. On the next da , August 6, the borrowers exercised their option under the lease to prchase the property. Then, on November 29, 1976, the two A4~J DECISION kFa W -a. I I * %l

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