Is a witness closing fee paid by the borrower to the title company a FC?

Yes, the witness closing fee aka signing service fee is a finance charge APR item.

I think I would have answered this question differently based on 226.4(a)(2). It contains a special ruel for closing agent charges and states that "fees charged by a third party that conducts the loan closing...are finance charges only if the creditor (i) requires the particular services for which the consumer is charged; (ii) requires the imposition of the charge; or (iii) retains a portion of the third-party charge...". Therefore, if you didn't require that the borrower pay for the witness signing fee or keep some portion of the fee, then it would appear that this fee would not have to be treated as a finance charge.

Does anyone have a different take on this?

That said, it won't hurt to include it in the finance charge. Since it's a real-estate secured loan, an overstated finance charge is probably not a violation (226.18(d)(1)(ii)), and I would assume the charge was pretty small as well.