This subject was raised by an attorney conducting a RESPA training session for the Pennsylvania Land Title Institute. I attended the session a few months ago.
He took the position that the home warranty was a buyer cost that should be placed on the buyer side of the HUD with a credit on page one from the seller.
I have done two prelim HUDs using this method. Neither transaction has closed and I am still waiting to get a reaction from the mortgage lenders. One transaction is an uninsured conventional loan with a regional bank and the other is a VA mortgage with a national bank. The VA transaction has a seller assist. I did a full credit for the assist plus a separate credit for the home warranty.
Though the sales contract typically includes a clause in which the seller does agree to pay for a home warranty, I believe home warranties have been off the radar of lenders.
If the methodology for RESPA 2010 does cause the home warranty to show as a seller paid buyer expense, how will mortgage underwriters react if at all?