Prepaid finance charge

Most often "lender-paid finance charge" is the functional equivalent of "waived." When a lender, by any device, relieves the borrower of the obligation to pay fees or interest, the amount can no longer be called a "charge." If the item isn't a charge then it can't be called a "Finance Charge", and if the item isn't a Finance Charge, then it can't be a "prepaid" Finance Charge" and can't be a deduction in the calculation of the Amount Financed.

Since the Finance Charge (including the prepaid sub-type) includes certain amounts required by the lender to be paid to third parties (MI premiums, for example), then the lender could actually pay these items on the borrower's behalf. Once again, the borrower is relieved of the duty to pay one or more charges and you can no longer call them Finance Charges. This case differs from waiver of an internally-imposed charge, however. In this case, the lender actually disburses more than the basic loan amount. Additional disbursements on the borrower's behalf represent additional value and can (should?) be added to the Amount Financed.