Inspector: I have seen lenders want to due this for customer services and I get it. As a consumer, if I tell you I am going to use a specific title company, but then my LE shows a different title company than what I am going to use, I am going to be confused as to why the company I told my lender I was using wasn't on the LE - if I even notice it because, if I don't notice it, I am going to be confused/upset that the actual fees on the CD were more than what was quoted on the LE when we always knew which title company we were using. So, I get the argument though I'm not a fan of doing it that way.
Vive Accommodare: Inspector is correct that there are tolerance concerns when doing this. Keep in mind that whatever third party title company you list on your early disclosures (service provider list & LE) becomes your preferred provider, subject to the 10% threshold. Therefore, if you haven't worked with this provider before, you are gambling that they aren't low-balling the numbers. In other words, when you a company on the service provider list/LE, you are guaranteeing that the fees won't increase more than 10%. If your management is comfortable offering this guarantee for providers you have never worked with before (maybe as a customer service for your borrowers), then go for it. If management is uptight about reimbursements, however, then you would probably be better off listing a provider you are comfortable with and have your lenders explain that this is the only title company we "guarantee" the fees won't increase more than 10% of what we quoted.
To answer your specific questions:
Would the title fees that we allow the borrower to shop for be an automatic zero tolerance if we were to disclose on the early disclosures the title company listed on the borrower's purchase contract?
It is 10%, not zero.
My fear is this could be misconstrued as us not giving the borrower the opportunity to shop for those services and immediately lumps them into the can't shop/didn't shop buckets. Am I overthinking this?
If you disclose it properly, you are technically giving them the opportunity to shop - its just that they chose NOT to shop because they picked the provider on your list (which was actually the provider they picked all along). As I explained before, this puts them in the 10% bucket since they chose the provider on your list.