What is the risk associated with fees paid to a third-party when the member is not allowed to shop for a provider?

When a member is not allowed to shop for a provider, the fees paid to a third-party service typically fall under the zero tolerance level. This means that if the borrower is not given the option to choose their own service provider, the lender must ensure that the final fees charged do not exceed the amounts disclosed on the Loan Estimate or Good Faith Estimate. The rationale behind this regulation is to protect borrowers from unexpected costs and ensure transparency in lending practices.

In situations where members can shop for providers, the tolerance levels can vary, allowing for some variation in fees. However, when they cannot shop, any discrepancy in fees is strictly controlled to prevent potential abuse or hidden costs. Thus, it is critically important for lenders to adhere to this zero tolerance standard to maintain compliance and protect the borrower.