A seller pays $3,200 of the buyer's loan discount points at closing. The processor asks whether that changes the buyer's finance charge. If these are bona fide seller's points paid by the seller, are they included in the buyer's Regulation Z finance charge?
Correct Answer
B) No: the $3,200 paid by the seller is not part of her finance charge
The finance charge measures what the consumer pays, so a charge borne by the seller does not enter it, even though the points sit on the buyer's loan. Other choices: attaching the charge to whose loan it is rather than who pays it inverts the test; nothing splits a charge between the parties for this purpose; and the payment is disclosed on the closing disclosure in the seller-paid column, so excluding it entirely is wrong. Source: 12 CFR 1026.4(a)
Why This Is the Correct Answer
The finance charge measures what the consumer pays, so a charge borne by the seller does not enter it, even though the points sit on the buyer's loan. Other choices: attaching the charge to whose loan it is rather than who pays it inverts the test; nothing splits a charge between the parties for this purpose; and the payment is disclosed on the closing disclosure in the seller-paid column, so excluding it entirely is wrong. Source: 12 CFR 1026.4(a)
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