Our mortgage department has a program for PMI where if the borrower meets certain criteria (i.e., credit score, etc.), the Bank can pay the single premium pmi at a lesser cost. So, for example, if the pmi ends up being $2500.00, they are showing on the settlement statement, the borrower paying a $2500.00 fee to the bank under the loan discount (line 802) and then the PMI premium of $2500.00 to the PMI company on line 902 as p.o.c. The $2500.00 is being disclosed as a prepaid finance charge on the TIL.
Is this the correct way to show the PMI? And, for tax reporting purposes, would we show the $2500 on the year end 1098 because it's disclosed as a loan discount fee? It just doesn't seem quite right to me.