We have a customer who is buying a primary residence from another customer. The seller is paying all closing costs including our loan fee. The title company is preapring the HUD1. How do we disclose the prepaid finance charge? Will we show this as a POC item on the TIL? Will the charge be added to the loan amount and then reduce the loan amount to the actual disbursement to the customer? I need help fast. the officer wants to close this morning.

If the seller is contractually libable to pay them then seller paid charges are not finance charges.

Thanks Dan,

We'll keep that in mind. Since this is a private deal between customers, we decided to err on the side of caution. We are treating them as pre-paid charges and erring on the side of the customer.

We appreciate your help!

Your disclosures are suppose to be based on the legal obligation. Although an over disclosure does not trigger reimbursement, it would still be a violation of the disclosure regulations if it outside of the specified tolerences. Erring on the side of the customer is not always the smart thing to do.

Could someone point me to the regulation that states this..

I have been told seller paid charges are not included in APR, but I can't find it for my self!

17(c) Basis of disclosures and use of estimates.

Paragraph 17(c)(1).

1. Legal obligation. The disclosures shall reflect the credit terms to which the parties are legally bound as of the outset of the transaction.

And from Section 226.4(c) you have:
"Charges excluded from the finance charge. The following charges are not finance charges:
...
(5) Seller's points."

The fact that seller's points are a specified exclusion presumes that there is a contract (legal obligation) between the lender and seller.