You may be confused.  The seller does not need to have lived in the property previously in order for the reporting requirement to apply, only that the person to whom the indebtedness is owed is the person from whom the residence was acquired.  See §6109(h).

In PTO, the seller who financed the mortgage will report the interest income on Sch B with the identifying information of the buyer by entering the information under Income / Interest Income (1099-INT, 1099-OID) / Payer / Additional Payer Information.