Answer:
Section 1026.17(c)(1) says "The disclosures shall reflect the terms of the legal obligation between the parties." It doesn't matter who actually pays closing costs, but rather who is legally responsible for paying them. If the borrower is told (probably in a commitment letter) that s/he is responsible for paying closing costs A, B, and C and all three items meet the definition of a Finance Charge, then they must all be reflected in the TIL calculations and disclosures.
Should the borrower enter into a two-party side agreement whereby the seller (or any other third party) agrees to pay one or more of these charges, that would have no effect on the calculations and disclosures because the lender is not a party to the side agreement.
If there is a three-party agreement (buyer, seller, and lender) wherein the lender agrees that the responsibility for paying charges A and C is transferred from the buyer to the seller (or other third party), then these two charges are excluded from the calculations and disclosures. Because the borrower still has the legal obligation to pay closing cost B, it continues to be included in the calculations and disclosures.
First published on BankersOnline.com 6/17/13
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