We have a limited number of title companies in our area who do a good job on construction loans (date down endorsements etc.)..

my question, how many companies must we have on our list of title companies that we select from, when the company has not been shown on the Purchase & sale agreement. (i.e. is 3 enough?)

Some of these companies will give the customer a break on the cost of these date down endorsements ( one per month during the construction phase)if they require more than 9 ... this break in fee is of course passed on to the customer...
Is this a RESPA violation of any kind? and can we select this title company if we know the construction phase will go 12 months..for example? without any violations...

As long as any benefits are going the customer there is no Section 8 issue. Regarding the number of recommended companies, depending on your geographic location(s), three should be plenty if geographically they make since for the majority of your customers.

Recently a client of mine had only two title companies on their list, but serviced an area in which a customer would have had to travel over 100 miles to get to the title companies on the Bank's perferred list. While the regulators did not specifically site them, they stongly told them that if they were going to have a list to limit their tolerence thresholds, then they better have enough title companies on the list that were convenient for the majority of their loan applicants.