There are two acceptable methods of curing a tolerance violation.
Method 1 – As you described, show 0 on line 1101 and show the amount paid by the lender on line 1104 as POC – Lender
Method 2 – Show the full amount owed by the borrower on line 1101 and on line 1104. Then show a credit on page 1 on line 204 as a “cure for 10% tolerance category.”